Basic Information Chairman's Statement
Management Discussion and Analysis Corporate Governance Report
Notices (Replacement of Lost Certificates)

Year 2014 First six months of 2014 Year 2013 First six months of 2013

BUSINESS REVIEW

Tinplating

Zhongshan Zhongyue Tinplate Industrial Co., Ltd. ("Zhongyue Tinplate") is a wholly-owned subsidiary of the Company. The Company holds a 66% interest in Zhongyue Posco (Qinhuangdao) Tinplate Industrial Co., Ltd. ("Zhongyue Posco") while the remaining 34% is held by POSCO Co., Ltd., an internationally renowned iron and steel enterprise. Currently, the annual production capacity of tinplate products and blackplates of the Group is 470,000 tonnes and 150,000 tonnes respectively, of which 220,000 tonnes of tinplate products and 150,000 tonnes of blackplates are from Zhongyue Tinplate's capacity, whereas 250,000 tonnes of tinplate products are from Zhongyue Posco's capacity.

In 2014, the Group produced 392,594 tonnes of tinplate products, representing an increase of 2.8% as compared to that in 2013. Among which, Zhongyue Tinplate and Zhongyue Posco produced 217,980 tonnes and 174,614 tonnes respectively. In addition, the blackplate manufacturing plant of Zhongyue Tinplate produced 132,743 tonnes of blackplates, a decrease of 5.2% as compared to that in 2013, providing a steady supply of raw materials (i.e. blackplates) for its production of tinplate products. The Group's tinplating plants in northern and southern China sold 397,137 tonnes of tinplate products, an increase of 2.6% as compared to that in 2013, of which, Zhongyue Tinplate and Zhongyue Posco sold 223,006 tonnes and 174,131 tonnes of tinplate products respectively, an increase of 6.2% and a decrease of 1.8% respectively as compared to that in 2013. Turnover was HK$3,074,926,000, a decrease of 2.0% as compared to that in 2013 and profit from operations was HK$74,473,000, a decrease of HK$16,929,000 or 18.5% as compared to that in 2013. The tinplating business accounted for 90.1% and 46.8% of the Group's turnover and profit from operations respectively.

In 2014, with more new tinplating production lines operated by other companies in Mainland China commencing production, the excess of supply over demand in the iron and steel industry and intense competition, all these placed significant pressure on the sales of tinplate products and the selling price of tinplate products decreased during the year. As the rate of decrease in the cost of raw materials was more than that in the selling price of tinplate products, gross profit for 2014 increased as compared to that in 2013. However, due to the depreciation of Renminbi against the Hong Kong Dollar and the United States Dollar during the year, an exchange loss was recorded for the year. Hence, profit of the Group's tinplating business decreased as compared to that in 2013. Through the pursuit of more flexible payment methods with its suppliers, the Group successfully increased liquidity of its working capital and bank deposits. Interest income significantly increased accordingly. Sales volume was also stabilised by capitalising on the favourable position in capital management, adopting selling prices more comparable to the market rates and adopting effective control in trade receivables' management. The Group continued the implementation of full budgetary control, strengthening of the internal control and improving its human resources management system by streamlining human resources, improving efficiency and optimising performance management. It also promoted energy saving, waste reduction and efficiency optimisation. All these in turn mitigated the pressure on the Group regarding the decrease in the selling prices of tinplate products and the surge in various operating costs. During the year, Zhongyue Tinplate passed the Food Safety System Certification (FSSC 22000), incubating new strengths for our business of metallic packaging for food.

As the tinplating factory in Zhongshan is operating at full capacity, in order to accelerate the transformation and upgrade of our business, the Group re-occupied certain plants in our factory area in Zhongshan, which were previously let out, to construct a new tinplating production line with an annual production capacity of 150,000 tonnes, together with expansion of the relevant coating and printing production lines. Besides, Zhongyue Posco has also acquired coating and printing production lines. It is estimated that the total investment cost of these production lines will be approximately RMB265 million (equivalent to approximately HK$336 million). These new production lines will enable the Group to improve the standard of production equipment and product quality and refine the product mix. It will also facilitate the development of new products and strengthen our core competitiveness. These coating and printing production lines have commenced operation consecutively by the end of 2014, while it is expected that the new tinplating production line will commence operation in the second half of 2015. By that time, the annual production capacity of tinplate products, blackplates and coated and printed tinplates of the Group's factories in northern and southern China will become 620,000 tonnes, 150,000 tonnes and 100,000 tonnes respectively.

Fresh and Live Foodstuffs

Guangnan Hong Company Limited ("Guangnan Hong") is a wholly-owned subsidiary of the Company. Guangnan Hong holds a 51% interest in Guangnan Live Pigs Trading Limited, a 16.12% (31 December 2013: 15.20%) interest in an associate, Hubei Jinxu Agriculture Development Co., Ltd. ("Hubei Jinxu"), and a 34% interest in an associate, Guangdong Zijin Baojin Livestock Co., Ltd. ("Guangdong Baojin"). In July 2014, the shares of Hubei Jinxu were listed on the National Equities Exchange and Quotations in Mainland China. Besides, in February 2015, Hubei Jinxu issued new shares to a new investor. After the issuance, the Group's equity interest in Hubei Jinxu was diluted from 16.12% to 15.45%.

In 2014, the turnover of the fresh and live foodstuffs business amounted to HK$315,293,000, representing a decrease of 4.6% as compared to that in 2013. Together with the share of losses less profits of associates, Hubei Jinxu and Guangdong Baojin, of HK$10,455,000, segment profit was HK$75,174,000, representing a decrease of 20.5% as compared to that in 2013. Turnover of the fresh and live foodstuffs business decreased mainly due to the impact of avian flu on our distribution and sales of live poultry business resulting in the suspension of import of live poultry into Hong Kong during the year. On the other hand, the decrease in the price of live pigs led to losses being incurred by one of the associates, which is engaged in pig farming and sales of pigs. Through continuous optimisation of the business workflow, the Group proactively strengthened its communication with governmental authorities, suppliers, industry participants and customers. Service standards were enhanced as a result. The Group also actively maintained the market supply. The overall market share in the live pigs supply into Hong Kong was about 46%. This provided a relatively steady contribution to the earnings of the Group. The gradual expansion in the scope of pig farming of Hubei Jinxu and Guangdong Baojin helps the Group to consolidate premium quality sources of live pigs and build a solid business chain for the fresh and live foodstuffs business.

Property Leasing

The Group's leasing properties mainly include the plant and staff dormitories of Zhongyue Tinplate and the office units in Hong Kong.

In 2014, turnover from the property leasing business of the Group was HK$22,286,000, a decrease of 18.1% as compared to that in 2013. Profit from operations of leasing properties amounted to HK$14,582,000, a decrease of 15.6% as compared to that in 2013. In line with the increase in the valuation of office units in Hong Kong in 2014, net valuation gains on investment properties of HK$37,910,000 (2013: HK$45,846,000) were recorded by the Group.

Yellow Dragon

In 2014, Yellow Dragon Food Industry Co., Ltd. ("Yellow Dragon"), an associate of the Group, recorded sales volume of 387,772 tonnes of its major product, corn starch, a decrease of 8.2% as compared to that in 2013. Turnover was HK$2,064,539,000, a decrease of 3.9% as compared to that in 2013. Through various control measures on costs and expenses implemented by Yellow Dragon, it turned from a loss of HK$10,058,000 in 2013 to a profit of HK$12,429,000 in 2014. As the Company holds a 40% interest in Yellow Dragon, the Group's share of profit was HK$4,972,000 (2013: share of loss of HK$4,023,000).

FINANCIAL POSITION

As at 31 December 2014, the Group's total assets and total liabilities amounted to HK$3,678,804,000 and HK$1,071,364,000, representing an increase of HK$372,830,000 and HK$267,836,000 respectively when compared with the positions at the end of 2013. Net current assets increased from HK$1,011,345,000 at the end of 2013 to HK$1,460,331,000. The current ratio (current assets divided by current liabilities) increased from 2.3 at the end of 2013 to 3.3.

Liquidity and Financial Resources

As at 31 December 2014, the Group maintained cash and cash equivalents of HK$1,070,798,000, of which an amount of HK$827,744,000 was denominated in Renminbi and HK$145,745,000 was denominated in United States Dollars while the remaining balance was denominated in Hong Kong Dollars. Cash and cash equivalents increased by 60.1% from the end of 2013. Interest income also increased from HK$16,322,000 in 2013 by 95.8% to HK$31,958,000 in 2014.

As at 31 December 2014, the Group's borrowings comprised (1) unsecured bank borrowings of HK$549,344,000 (2013: HK$172,523,000); and (2) loans from a related company of HK$79,560,000 (2013: HK$79,560,000). 63.6% (2013: 63.5%) of the Group's borrowings was guaranteed by the Company. As at 31 December 2014, 36.4% of the Group's borrowings was repayable within 1 year, and the remaining balance was repayable within 2 years, while as at 31 December 2013, all of the Group's borrowings was repayable within 1 year. All borrowings are subject to annual interest rates ranging from 1.25% to 1.67% (2013: 1.74% to 2.16%). 76.3% (2013: 95.0%) of the Group's borrowings bears interest at floating rates. The management pays attention to variations in interest rates.

As at 31 December 2014, the Group's gearing ratio, calculated by dividing the net borrowings (being borrowings less cash and cash equivalents) of the Group by total equity attributable to equity shareholders of the Company, was -18.3% (2013: -18.1%).

In January 2014, the Group entered into a facility agreement (the "Facility Agreement") with Industrial and Commercial Bank of China (Asia) Limited and The Hongkong and Shanghai Banking Corporation Limited. In accordance with the Facility Agreement, the Group was granted a two-year term loan facility with a maximum amount of HK$400,000,000 for the purpose of general corporate financing requirements. The abovementioned facility was fully drawn, and the Group's former bank loan of HK$160,000,000, which matured in June 2014, was early repaid in full during the current year.

As at 31 December 2014, the Group's available banking facilities which are used for working capital and trade finance purposes, amounted to HK$689,744,000, of which HK$565,895,000 was utilised and HK$123,849,000 was unutilised. 58.0% of the Group's banking facilities was guaranteed by the Company. Currently, the cash reserves and available banking facilities, as well as the steady cash flow from operations, are sufficient to meet the Group's debt obligations and business operations.

Capital Expenditure and Capital Commitments

The Group's capital expenditure in 2014 amounted to HK$103,893,000 (2013: HK$43,035,000). Capital commitments outstanding at 31 December 2014 not provided for in the financial statements amounted to HK$183,540,000 (2013: HK$254,599,000), mainly for the construction of a new tinplating production line in Zhongshan, together with expansion of the relevant coating and printing production lines. It is expected that the capital expenditure for 2015 will be approximately HK$260 million.

Acquisitions and Disposals of Investments

In 2013, the Group's associate, Hubei Jinxu, issued new shares to its existing shareholders and other parties. After the issuance of the new shares, the Group's equity interest in Hubei Jinxu was diluted from 18.66% to 15.20%, which resulted in a gain on deemed disposal of HK$5,086,000.

In 2014, Hubei Jinxu repurchased all shares held by one of the existing shareholders. After the repurchase of these shares, the Group's equity interest in Hubei Jinxu increased from 15.20% to 16.12%, which resulted in a loss on deemed acquisition of HK$946,000.

Except for the abovementioned matter, the Group had no material acquisitions and disposals of investments during the year of 2014.

Pledge of Assets

As at 31 December 2014, the Group's interest in Guangdong Baojin was pledged to the major shareholder of Guangdong Baojin as a security for a loan and the related interest due to this shareholder by Guangdong Baojin amounted to HK$11,800,000.

As at 31 December 2013, none of the assets of the Group was pledged.

Contingent Liabilities

In 2013, a third party in Mainland China filed a claim against a subsidiary of the Group in the Court of Zhongshan City to recover an outstanding trade debt of approximately RMB2,060,000 (equivalent to HK$2,611,000) and a penalty of approximately RMB4,962,000 (equivalent to HK$6,290,000) for non-payment. According to the judgement made by the Court of Zhongshan City in May 2014, the subsidiary is required to repay the above trade debt and the related penalty. The subsidiary submitted an appeal in June 2014 to the High Court of Guangdong Province. Currently, the court appeal proceedings are still in progress.

In prior years, this same third party had also filed claims in respect of the same matter and had won the case, but the claims were finally denied by the court. Based on the information currently available and a legal opinion obtained, the Group considers that the subsidiary has a considerable prospect of success in the above litigation. Accordingly, no provision was made in respect of this claim.

Except for the abovementioned matter, the Group had no material contingent liabilities as at 31 December 2014.

Exchange Rate and Interest Rate Exposures

The majority of the Group's business operations are in Mainland China and Hong Kong. The Group is exposed to foreign currency risk primarily through import purchases from overseas suppliers and export sales to overseas customers that are denominated in a currency other than the functional currency of the operations to which they relate. The currency giving rise to this risk is mainly the United States Dollar against Renminbi. In respect of trade receivables and payables denominated in currencies other than the functional currency of the operations to which they relate, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.

In respect of unforeseen fluctuations in exchange rates, the Group will hedge the exposure as and when necessary. As at 31 December 2014, forward foreign exchange contracts of RMB155,089,000 (equivalent to HK$196,591,000) against the United States Dollar were entered into by the Group to hedge against currency risks in respect of export sales. As at 31 December 2013, forward foreign exchange contracts equivalent to HK$232,954,000 in total were entered into by the Group.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 December 2014, the Group had a total of 1,197 full-time employees, a decrease of 39 from the end of 2013. 195 employees were based in Hong Kong and 1,002 were based in Mainland China. Staff remuneration is determined in accordance with the duties, workload, skill requirements, hardship, working conditions and individual performance with reference to the prevailing industry practices. In 2014, the Group continued to implement controls over the headcount, organisation structure and total salaries of each subsidiary. The performance bonus incentive scheme for the management remained effective. Through performance assessment of each subsidiary, a performance bonus was accrued according to various profit rankings and with reference to net cash inflow from operations and profit after taxation. In addition, bonuses will be rewarded to the management, key personnel and outstanding staff through assessment of individual performance. These incentive schemes have effectively improved the morale of our staff members. The Company has also adopted share option schemes to encourage excellent participants to continue their contribution to the Group.