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Tiangong International Announces 2016 Annual Results

Die Steel business delivered double-digit revenue growth

Titanium business confirms to grow with strong momentum

Financial Highlights

  • Revenue decreased 1.6% to RMB3,376 million
  • Revenue of core businesses grew 1.5% year-on-year
  • Net profit increased 52.3% year-on-year to RMB111 million
  • Die steel business revenue increased 24.0% year-on-year
  • Titanium business revenue recorded a significant increase of 35.1% year-on-year

HONG KONG, March 29, 2017 /PRNewswire/ -- Tiangong International Company Limited ("Tiangong International" or the "Group"; Stock Code: 826.HK), China's leading global new alloy materials and tools provider, today announced its audited consolidated annual results for the year ended 31 December 2016 ("2016", the "Period" or the "Reporting Period").

2016 is a year of breakthrough for the Group. In financial point of view, the Group completed a turnaround from the extremely severe environment in 2015 to the slow recovery in 2016. Most of the core segments caught back the ascending trend. Although total revenue decreased by 1.6% to RMB3,376 million from RMB3,429 million in previous year, the revenue generated by the Group's core businesses other than trading of goods increased by 1.5%. Gross profit decreased by 4.9% year-on-year to RMB372 million compared with RMB391 million in 2015 due to the delayed recovery in high speed steel market. Net profit attributable to equity shareholders of the Company significantly increased by 52.3% year-on-year to RMB110 million compared with RMB73 million in 2015. On the operating perspective, the Group improved its debt collecting efficiency and credit control to the customers. The Group also significantly improved its gearing after a few years of capital investment.

Mr. Zhu Xiaokun, Chairman of Tiangong International, said, "In face of the new economic conditions, Tiangong International is presented with both challenges and opportunities. To remain competitive within this environment, the Group continued to focus on high-end products development and cost savings strategy. Looking back to 2016, the Group was glad to have a strong research and development team and eventually got rewarded during the year. We mastered the production of bimetallic saw blade steel, which was previously purely rely on import. The advance was a promising step to the Group for capturing the domestic market of this high-end product. The Group also overcame the previous bottleneck in the capacity utilization by refining the process and parameter in the smelting process. Without additional investment, we achieved a 25% improvement in the capacity utilization. The Group also actively brought forward various major project constructions. During the Reporting Period, the Group established Jiangsu Marine Engineering New Material Research Center."

The die steel operation continued to be the largest contributor to Group revenue during the Reporting Period, accounting for 37.5% of total revenue. Revenue generated from DS increased by 24.0% to RMB1,262 million compared with RMB1,018 million in 2015. As a result of the recovery in demand from domestic high-end equipment manufacturing industry, the Group's domestic revenue in DS increased by 91.5% from RMB334 million in 2015 to RMB639 million. On the other hand, the speed of recovery in overseas markets was relatively slow compared with the domestic market. The average selling price of overseas markets was not yet fully recovered to the same level as in 2015. However, with the Group's prior effort devoted to expand the overseas markets, the damage from the slower recovery was minimized. As a result, the Group's export revenue decreased by 8.9% to RMB624 million.

During the Reporting Period, demand of HSS in both domestic and overseas markets was weak and the Group experienced price pressure globally, especially in domestic markets, causing the Group's revenue of HSS to decrease by 41.8% from RMB679 million in 2015 to RMB395 million. Domestic and export revenue recorded a decrease of 44.2% and 36.2% to RMB263 million and RMB132 million, respectively.

The Group's revenue from cutting tool increased by 2.5% to RMB528 million compared with RMB515 million in 2015. To cope with the competition in the domestic market of cutting tools, the Group modified the sales strategy by selling the cutting tools products at a more competitive price. As a result, the Group recorded a significant increase in domestic sales volume by around 20%. Compromised by the lower average selling price, domestic revenue increased by 8.3% to RMB202 million compared with RMB186 million in 2015. The overseas markets of cutting tools remained relatively stable. Accordingly, the Group's export revenue decreased slightly by 0.8% to RMB326 million compared with RMB328 million in 2015.

Titanium alloy segment continued to grow at over 30% for past 4 years since its introduction by the Group in 2012. During the year, revenue of this segment increased 35.1% year-on-year to RMB234 million compared with RMB173 million in 2015. Such achievement was mainly driven by the Group's active development in a wider range of titanium alloy products. As more distribution channels were created during the past 4 years, the Group gradually built up a reliable sales force and a large distribution network for its titanium products. Titanium alloy segment developed the first export sales during the year. Although the export revenue was not significant, it was an achievement of the Group in developing overseas markets of titanium alloy segment.

Looking forward to 2017, following the successful removal of excess capacity in the PRC steel industry in 2016, China's national supply side reform will be continued with a greater focus on removing low-end steel manufacturers by means of operational and environmental standardization. The new focus of the reform is to protect the advanced production capacity by removing obsolete production capacity. To synchronize with the national policy, the Group established a new research center focusing on research and development of high-end products. The new research center will be put into full operation in 2017. In addition, the Group will cooperate with major special steel research institutions on the new product and technology development.

Mr. Zhu Xiaokun concluded for the Group's future development, "The Group already acquired the pricing power in domestic DS market through China's national supply side reform in 2016. We hope to improve our pricing power in the HSS market by positioning at high-end manufacturing. For the overseas markets, the Group would like to improve the profit margin by increasing the direct exposure and connection with end customers. Both the Group and the end customers could be benefited from a more streamlined the distribution mechanism. Moreover, revenue of the titanium alloy segment continued to grow at over 30% for the past 4 years since its introduction by the Group. The prime focus of the segment would be the development of new products and their application. Effort would be put on steel-titanium composite plate development and its application in ocean-related industry, with our strategic partner, Nanjing Iron & Steel Co., Ltd."

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About Tiangong International Company Limited

Tiangong International, (the "Group"; Stock Code: 826.HK), is a leading global new alloy materials & tools provider headquartered in Danyang City, Jiangsu Province. With its top-quality products, Tiangong focuses on providing special steel including HSS, Cutting Tools, Die Steel, and Titanium Alloy to a wide range of end-market including consumer electronics, automobile, aerospace, medical and marine industries worldwide. The group has successfully established a leading global and domestic market position in all the segments. Leveraged on its advantageous expertise and experience in special steel, Tiangong continues to invest in new alloy material innovation and high-end product development.