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Improving Results From Richina Pacific

Improving Results From Richina Pacific

Statement issued by John Walker, Chairman of Richina Pacific Limited
Net Profits up 18.2% to US$2.38 million.

That is the bottom line of the six-month results announced today by the newly appointed Chairman of Richina Pacific Limited, Mr John Walker, from New York.

For the six-month period ending June 30, 2004, the un-audited Net Profits after tax attributable to shareholders were US$2.38 million, up 18.2% on the same period last year.

Before recognising minority interests, the Net Profits were up 20.6%, on revenues of US$184 million, which were up 18.9% on the same period last year.

Richina Pacific now reports in US dollars according to the standards issued and approved by the International Accounting Standards Board.

The Company has made an encouraging start to the year. In increasing revenues and profits, Richina Pacific has laid the foundation for a much improved 12-month financial performance and is rebuilding momentum based around the growing significance of its world class finished leather manufacturing operation.

Significantly, all three business operations - the finished leather operations of Shanghai Richina Leather, the New Zealand property and construction activities of Mainzeal, and the Beijing-based Blue Zoo aquarium - have contributed to the improved results.

Construction, interior fit out, and development activities presently remain buoyant for the Mainzeal operation, and this is reflected in the June forward work load of NZ$325 million (compared to the same period last year of NZ$223 million), which includes a number of high profile projects like the TelstraClear Events Centre in Manukau City, the Auckland Arena Project, and the Westfield Mall and cinema project in Christchurch. Mainzeal also has recently secured the NZ$46 million Capital Properties project for the Defence Department headquarters in Wellington.

The Mainzeal half year Net Profits of NZ$1.2 million (US$0.7 million) are down on last year’s same period result, but in the prior year period the Mainzeal contribution included a US$2.1 million gross contribution from the realisation of the sale of the Mobil-on-the-Park development. No developments were realised in the current reporting period.

The first half Mainzeal result does not appropriately reflect on its performance, due to the timing of projects which should adjust to reflect positively in the anticipated improved second half result.

The Blue Zoo was again a “victim” of the SARS virus, as an estimated US$125,000 in revenues were lost in the late April and May “Golden Week” period as many previously booked tours cancelled to avoid the Beijing area. Since mid-June, Blue Zoo’s attendance numbers, and hence its revenues, have shown an improvement over the prior year, and this is expected to continue for the rest of the calendar year. But this remains a very cost competitive market. The Blue Zoo period result of a US$27,000 loss was, however, a significant improvement on the also SARS-affected loss of US$550,000 in the same period last year.

The strength and growing reputation of the Bovine Shoe division of Shanghai Richina Leather (SRL) is dominant in the Net Profits with US$2.2 million reported for all of SRL. The SRL Net Profits represent an 89% increase over the same period last year, and are in fact 55% ahead of the Net Profits SRL reported for the full 12 months to December 2003.

The second half SRL contribution, with reducing losses from the Ovine Garment business and from the growth in the Upholstery division, are anticipated to further improve the position, albeit at a more moderate rate than occurred in the first half.

The SRL US$23.3 million facility expansion and upgrade project, while on time and budget, will not be fully completed until mid-year 2005. This project is not yet benefiting reported results, but will begin to do so following the official opening of the new tannery in mid- October of this year when the new capacity and the newly installed equipment will begin to be progressively brought to full operational efficiency. There will be some production disruption as current facilities are at capacity and there is a need to allow time for the installation and relocation of much equipment and for the significant re-configuration of workflows across all four tannery buildings.

The management and the detailed project planning by SRL’s CEO Dennis Thams and his team will minimise the impact on SRL’s customers and on earnings for the period. This is a necessary burden in developing the new capacity and the greatly improved efficiencies that will occur across both the old and new facilities. These improvements will benefit earnings in many of the years ahead.

Earnings per share were 1.65 US cents for the period (annualised 3.30 US cents). No income tax is payable and no dividends were provided for at this time.

The US$2.38 million first half Net Profits result reflects in the US$2.13 million of operating cash surplus generated, and in the US$18.90 million of cash held at the June 30 balance date.

With total equity of over US$50 million, Richina Pacific is well positioned to consider various opportunities for its continued growth.


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