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Leather Operation Returns Good Profit For Richina

Richina Pacific Limited


Leather Operation Returns Good Profit For Richina

Statement made by Alastair MacCormick, Chairman, Richina Pacific Limited

Richina Pacific’s leather operations in China were the main contributor to the company lifting audited, after tax operating profit by 153% to $8.2 million for the year ended 31 December, 2002, generating a return of 11.3 cents a share.

Last year the company reported a $15.3 million loss after writing down assets by $18.6 million.

Shanghai Richina Leather is now firmly established as the company’s main business, and shareholders are starting to be rewarded for the investment made in this world class tanning and marketing facility.

The leather business contributed $13.1 million (up 386%) to the company’s total operating surplus before unallocated overheads and interest expense.

This is the first major contribution to profit from Shanghai Richina Leather since we founded the operation five years ago. It marks the end of the establishment phase of the business and should lead to a reappraisal of its commercial significance.

Employing more than 1850 people and manufacturing some 55 million sq ft of finished and semi finished leather a year, the operation is one of the largest in a country that dominates the world’s leather production.

The potential for further growth of Shanghai Richina Leather is limited only by our capability to fund state of the art equipment and working capital. Our announced rights issue, which will raise US$10.5 million, will materially assist us to increase production capacity at the plant by three quarters over the next three years.

Our New Zealand construction and development business, Mainzeal, also made a strong $6.8 million contribution to operating surplus. Last year it made a loss of $2.3 million.

Mainzeal benefited from the recent surge in the commissioning of substantial construction projects in New Zealand, and from its policy of concentrating on the quality end of the construction market.

At balance date Mainzeal had a forward order book valued at $162 million.

Blue Zoo Beijing, our aquarium in China, made a modest net surplus of $657,000, compared to a $20 million loss last year following a significant write down of its book value to better reflect its market value. This business remains cash positive.

Total revenue for the company was $497 million, down 23%. The prior period included $159 million of revenue from New Zealand businesses no longer owned while the construction sector’s revenue was down $22 million.

The leather operation increased its revenue by 17% to $216 million.

Our two China based businesses provided the company with 67% of its operating surplus and 45% of its revenue, and this dominance will increase in future years. Our only business interest in New Zealand from July 2003 will be Mainzeal.

No provision has been made for taxation (nil last year), interest expense on loans was down $2.4 million to $8.6 million and overheads were reduced by 3% to $3.7 million.

Total assets at period end were $187 million ($201 million).

Directors have resolved to not pay a dividend, and this year’s surplus will be reinvested in the company to assist with its growth plans.

This year’s profit does not include any contribution from the sale of the Wellington complex
Mobil-on-the Park for $66 million in September 2002. Settlement is due on 30 June 2003, and at that time the company anticipates booking a contribution to surplus of $2.5 million and will have on hand additional cash of $26.5 million after settling mortgages and other commitments.


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