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Richina Lifts Profit Forecast

December 8, 2004

Richina Lifts Profit Forecast After China Acquisition

Richina Pacific is tracking to record a profit well in excess of US$6 million for the financial year ending 31 December 2004, up 160% on last year’s result.

At today’s special meeting in Auckland, Chairman John Walker, told shareholders that the significant improvement in performance was directly attributable to the acquisition of 68% of Shanghai Leather Company Limited ( SLC ) in October 2004 for US$20.68 million.

He told shareholders at the meeting, called to seek approval to eventually increase Richina Pacific’s ownership in SLC to 100%, that the acquisition was a “ground-breaking deal that will establish a path for a very prosperous future”.

He said while Richina Pacific was satisfied it had “obtained good value” the different method of preparing consolidated accounting in China meant it could not at present be precise about “specific values”.

Work was underway to adopt international accounting standards across SLC’s operations but this work was not yet complete.

In acquiring SLC Richina Pacific has obtained 100% ownership of 43 enterprises and their land rights, and a minority interest in another 8 enterprises and their land rights.

“Many of these businesses have significant potential in their own right, and together with their management we are developing plans for the profitable growth of specific enterprises,” said Mr Walker.

Richina Pacific also now owns the land rights on which its world class leather tanning and manufacturing operation is sited in Shanghai, and Richina Pacific has placed a US$13 million value on the former lease arrangements

Mr Walker said that Richina Pacific was well positioned to benefit from any free trade agreement between China and New Zealand, and that the strong relationships Richina Pacific had built in China was a “strong foundation” and Richina Pacific had the necessary “trust and respect that will position us well to create future opportunities”.

Prior to acquiring SLC, Richina Pacific was forecasting a year end profit in the order of US$5 million.

Mr Walker told shareholders that had the acquisition not taken place, the company would have fallen short of that profit forecast due to the continued poor performance of the ovine garment operation and the start up nature of its upholstery leather division.

The Board had addressed the issues raised “with intensity” and that the board expected operating businesses in future to meet budget and forecasts. “We will do better in the future,” he said.

The New Zealand based Mainzeal construction and development business, and Beijing’s Blue Zoo, had performed strongly and had delivered on forecasts.

At the meeting shareholders approved

Richina Pacific acquiring the remaining 32% of SLC Funding arrangements to purchase the remaining shareholding of SLC, including directors purchasing new shares Changes to the company’s by-laws and Introduction of a Dividend Reinvestment Scheme.


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