Tiangong International Announces 2018 Annual Results

Export revenue of all four core segments achieved double digit growth

HONG KONG – (ACN Newswire) – The board of directors of Tiangong International Company Limited (“Tiangong International” or the “Group”; Stock Code: 0826.HK) is pleased to announce the audited consolidated results for the year ended 31 December 2018 (the “Reporting Period”) and the comparative figures for the same period of 2017.

During the Reporting Period, revenue of Tiangong International for the year was RMB5.022 billion, representing an increase of 28.8% as compared with RMB3.898 billion in 2017. Net profit attributable to equity shareholders increased by approximately 53.1% from RMB169 million in 2017 to RMB259 million in 2018, mainly attributable to (i) increase in sales volume of the products of the Group’s four core segments during the year due to increased market demand and market share; and (ii) the increased price of major raw materials used by the Group during the year caused an increase in the average selling price of the products of the Group’s four core segments. Margin of profit attributable to equity shareholders of the Company increased from 4.3% in 2017 to 5.2% in 2018.

The Board recommended the declaration of final dividend of RMB0.0357 per ordinary share.

During the Reporting Period, the revenue of the Group’s overseas markets had not been affected by the China-US trade war at all. The sales volume to the US has not gone down but up, which has fully reflected that the quality of the Group’s products is internationally recognised and the Group has gained the trust and support from overseas clients. Therefore, despite the uncertainty in global economic environment, the demand of the clients is still steady. During the year, revenue generated from Die Steel (“DS”) segment increased by 24.4% to RMB 2.098 billion. For overseas market, the continuous strong market demand stimulated an increase of 17.7% in sales volume while export revenue increased by 36.9%. For High Speed Steel (“HSS”) segment, both domestic and export revenue experienced an increase in 2018. The segment revenue increased by 19.5% to RMB782 million, while its domestic revenue increased by 15.7%. The market demand for overseas market is relatively strong and the export revenue increased by 28.3%; for cutting tools segment, overall revenue increased by 9.6% to RMB581 million, while the sales volume of overseas market increased by 23.8%. For titanium alloy segment, demand for titanium products remained strong during the year. 37.8% increase in sales volume was recorded. At the same time, the price of sponge titanium increased during the year. As the major raw material of titanium alloy segment, the increased price on sponge titanium was passed on to our customers. Accordingly, average selling priced also increased by 5.8% during the year.

For the product development strategy, the Group strives to explore high-end markets to increase profits. After the restructuring of factory area in Danyang, Jiangsu, the Group is fully committed to develop the powder metallurgy project. The first Powder Metallurgy Institute in mainland China was established at the end of last year jointly by the Group and China Iron & Steel Research Institute Group. It aims to develop high-quality metal powder products comparable to international advanced level. The Group could enter the high-end market by setting up a powder metallurgy production line to improve the technical level of the Group’s products and meet the high specification requirements of aerospace industry and 3D printing etc. With the focus on entering high-end market, the Group has made efforts to automate production system in recent years. Apart from enhancing the precision of products, it would also reduce manpower cost and speed up the production process.

For the marketing strategy, the Group has strengthened direct sales channels to minimise the dependence on distributors used to be in this industry. During the year, the proportion of direct sales enterprise customers increased. Increasing the direct sales channel would help reduce the distribution cost and improve the Group’s gross profit margin. Meanwhile, clients would enjoy a lower purchase price. This mutual beneficial cooperation with clients would achieve a win-win situation. By eliminating the barrier of distributors, the Group could enhance its understanding of customer needs, such as the product specifications and requirements of post-processing. The Group would be able to adjust the products accordingly and ensure that the products meet the market needs well.

Looking into the future, Mr. Zhu Xiaokun, the Chairman of Tiangong International Company Limited, underlined that innovation and advancements are the best way to remain competitive and to realise the true value of the Group’s businesses. After many years of effort in innovation, Tiangong International has grown into a leading new materials company. The major products of the Group, tools steel (including DS and HSS), titanium and titanium alloy, were included in the National Catalogue of New Materials Industry, while high-speed tool steel was included in the Ministry of Industry and Information Technology’s List of Champion Single Products in Manufacturing Industry (Third Batch). In the future, the Company will strengthen its position as the first-rated company who can pioneer the development of the world’s new materials industry and offer strong support for the transformation and upgrade of China’s manufacturing industry. With increased publicity, the Company will showcase to the market what professional advantages and industrial status a leading new materials enterprise enjoys as well as its mission of maximizing shareholder value and maintaining the highest standards of corporate governance.

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