Tiangong International Announces 2017 Interim Results

Die Steel business and High Speed Steel business delivered double-digit revenue growth

Financial Highlights

  • Revenue increased 19.7% to RMB1,877 million
  • Revenue of core businesses grew 30.8% period-on-period
  • Net profit increased 52.8% period-on-period to RMB39.3 million
  • Die steel business revenue recorded a significant increase of 47.2% period-on-period
  • High Speed Steel business revenue recorded a significant increase of 48.0% period-on-period

HONG KONG, Aug. 16, 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 unaudited consolidated interim results for the six months ended 30 June 2017 ("1H 2017", the "Period" or the "Reporting Period").

2017 is a year of growth for the Group. Total revenue increased by 19.7% to RMB1,877 million from RMB1,568 million in 1H 2016. The revenue generated by the Group's core businesses other than trading of goods increased by 30.8% period-on-period. Gross profit increased by 14.5% period-on-period to RMB214 million compared with RMB187 million in 1H 2016 as a result of the increase in the average selling price of the Group's DS and HSS segments. Net profit attributable to equity shareholders of the Company significantly increased by 52.8% period-on-period to RMB39.3 million compared with RMB25.7 million in 1H 2016.

Mr. Zhu Xiaokun, Chairman of Tiangong International, said, "In face of the new economic conditions, Tiangong International persists in manufacturing high-efficiency products in order to cope with markets demand. High speed steel, die steel and titanium alloy, the three major products of the Group are all included in the guidelines on emerging sectors of strategic importance of the "China's 13th Five-Year Plan", showing that Tiangong's main business is in line with national strategic planning. In this environment, the Group will continue to focus on the research and development of high-end products and cost-saving strategies in order to remain competitive. In March 2017, the Group launched its online flagship store on China South City's hardware platform, thereby expanding the online influence of Tiangong brand. In terms of overseas markets, the carbide cutter production expansion project is going according to plans, and the production capacity of carbide products will be doubled once the main and supporting auxiliary equipment is delivered at the end of the year. At the same time, the sheet project has been launched, and it will become the only full process sheet production line in the industry upon the project's completion."

The die steel operation continued to be the largest contributor to Group revenue during the Reporting Period, accounting for 41.9% of total revenue. Revenue generated from DS increased by 47.2% to RMB786 million compared with RMB534 million in 1H 2016. Driven by an upward pricing trend in rare metals to which the Group uses as raw materials, the average selling price of DS products increased in general. The Group's domestic revenue in DS increased by 91.8% from RMB223 million in 1H 2016 to RMB429 million. Regarding the overseas markets, the demand was relatively stable when comparing to the first half of 2016, where 3.2% increase in sales volume was recorded. The increase in export revenue of 15.1% to RMB358 million (1H2016: RMB311 million) was mainly attributable to the increase in average selling price of DS products.

Similar to the situation in DS, the average selling price of HSS products increased in general as a result of rising procurement price of rare metals. Therefore, the Group's revenue of HSS increased by 48.0% from RMB207 million in 1H 2016 to RMB306 million. In domestic market, moderate recovery in demand in HSS was still recorded. Coupled with the impact of increase in average selling price, domestic revenue increased by 50.7% to RMB209 million (1H2016: RMB138 million). For overseas market, recent market development effort allowed the Group's HSS products to gain new application footprint in overseas markets. The application of the Group's HSS products was now penetrated to new customers who produce thimble and complex tool. With the deeper penetration and coverage, the export revenue increased by 42.4% to RMB97.4 million (1H2016: RMB68.4 million).

Competition in both domestic and overseas market of cutting tools remained severe. During the Reporting Period, the Group's revenue from cutting tool decreased by 2.3% to RMB232 million compared with RMB238 million in 1H 2016. For domestic market, the demand of cutting tools was supported by the recovery of various manufacturing industries. As such, under the Group's competitive pricing strategy, the increase in sales volume fully contributed the increase in domestic revenue by 28.3% to RMB110 million (1H 2016: RMB85.5 million). For overseas market, some demand in high end cutting tools shifted from HSS cutting tools to carbide tools. To cope with the change in the demand, the Group started the production of high end carbide tools in 2016. During this transitional period, the Group's export sales volume was affected, which resulted in a decrease in export revenue by 19.5% to RMB122 million (1H 2016: RMB152 million).

After 4 years efforts to capture market share in titanium alloy market, the Group adjusted its strategy to strengthen the profitability of titanium alloy products. During the Reporting Period, revenue of titanium alloy segment decreased 14.5% period-on-period to RMB84.1 million compared with RMB98.4 million in 1H 2016. Titanium alloy was priced at a more profitable level in the first half of 2017. Accordingly, compromised by a decrease in sales volume, higher average selling price was set for long term profitability. First export sales in titanium alloy segment was recorded in second half of 2016. The Group continued to develop the overseas market in 2017 with a good progress.

Looking forward to the second half of 2017, after acquiring the pricing power in domestic market and establishing distribution network in eastern and southern China market, the Group understood that research and development and eventually product advancement was essential to allow itself to fully utilise the advantage in pricing and distribution. The Group believed innovation and advancement is the best way to keep itself competitive and could eventually release the true value of the businesses. Finally, we re-affirm that maximization of shareholder value, whilst adhering to the highest standards of corporate governance is always our top priority.

Mr. Zhu Xiaokun concluded for the Group's future development, "After the effort devoted to develop eastern and southern China market through strategic partners and grabbing of additional market share as a result of removal of excess capacity in the PRC steel industry in 2016, the Group successfully recovered from the trough of the industry. To enhance our innovation and research and development capacity, the new research centre will be put into full operation by the end of 2017. In the meantime, new research projects cooperated with various research institute, including Nanjing Tech University, were initiated already. All the new research and development projects were related to applying the Group's product into New Material industry specified by the "China's 13th Five-Year Plan" and "China Manufacturing 2025", targeting to catch up with the national development direction of China."

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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.