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Richina’s Profit At $3.6 Million Ahead Of Forecast

Richina’s Profit At $3.6 Million - Ahead Of Forecast

- Sars Impacts

Statement made by Alastair MacCormick, Chairman, Richina Pacific Limited

With cash reserves of $37.5 million, Richina Pacific is well placed to build on its unaudited profit of $3.6 million after extraordinary items for the six months ending 30 June 2003.

Operating profit at $4.3 million was up 3% on the comparative period and ahead of our latest forecast made at the time of the annual meeting, but an extraordinary loss of $763,000 resulting from the closure of the company’s aquarium operation in Beijing for six weeks as a consequence of the SARS virus reduced the net surplus attributable to shareholders by 15%.

Given the range of issues that affected the company’s operations in the six months – including SARS, the strengthening of the New Zealand dollar, the economic consequences flowing from the Iraqi war and drought reduced pelt quality – annualized weighted earnings at 8.5 cents a share post one-for-one cash issue is a “realistic” result ( 11.7 cents in 2002 ).

Our expectation is that the bottom line for the full year will not be less than $6.5 million.

No provision was made for taxation ( nil in 2002 ).

Total revenue generated by the company’s three business units – a leather manufacturing operation on Shanghai, the development and construction activities of Mainzeal and the aquarium – was $272.6 million, up 17%, but the revenue from the two China businesses declined by 5% to $97.7 million. The reduction came from a combination of the aquarium closure and exchange conversions. Revenue from the SRL leather operation in US dollar terms, the currency in which it trades, was up 20% on the same period last year.

The sale of the Wellington office, shopping and car parking complex, Mobil-on-the-Park, and other operating activities saw a positive operating cash flow into the company during the period of $41.4 million ( at the same period last year the company had an operating cash outflow of $3 million ).

It resulted in a strong cash position at period end of $37.5 million ( compared to $14.1 million last year ) which will be used to grow the leather operation in China by financing forthcoming capital expenditure, to secure future loans being made by offshore banks and to fund the seasonal requirements for skins and pelts. It will also cover Mainzeal’s retention obligations to suppliers.

The greatest impact on the earnings of the leather operation was caused by the lower than anticipated quality of New Zealand sourced lambskins, affected by adverse climatic conditions.

Other factors contributing to the operation’s decline in earnings from $6.2 million to $4.7 million were the transition from toll manufacturing of upholstery leather to supplying customers direct, a slight softening in the demand for shoes leather and the strength of the NZ dollar against the US dollar.

Prior to being forced to close through the SARS virus, Blue Zoo Beijing’s trading for three months was ahead of budget and ahead of that for the previous period.

Mainzeal’s contribution to the first half earnings before interest and unallocated overheads was $5.7 million, up 61%. The margin on the sale of the Mobil complex and net earnings from the building during the six months contributed $5.0 million of the $5.7 million surplus.

Mainzeal’s forward order book of work at period end was $223 million.

During the period the company increased the number of shares on issue to 144.4 million through a one-for-one renounceable share issue which raised US$10.4 million.

At June 30 2003 the net asset backing per share was 56.8 cents compared to 57.6 cents 12 months’ earlier after factoring in the dilution for the rights issue.

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