Gross margin and growth momentum across core segments maintained
Tiangong International Company Limited (“Tiangong International” or the “Group”; Stock Code: 0826.HK), the world’s leading manufacturer of high-end new materials, is pleased to announce its interim results for the year ended 30 June 2020.
Financial Highlights
– Revenue from four core businesses increased by 4.2% to RMB1,983 million;
– Gross profit increased by 17.1% to RMB542 million;
– Net profit attributable to equity shareholders increased by 41.2% to RMB211 million.
Affected by the Novel Coronavirus (COVID-19) pandemic, the global macroeconomy, capital markets and industry chains have encountered significant challenges during the period. Tiangong, however, maintained sustainable growth in its four core business segments, leading to year-over-year revenue growth of 4.2%, compared to the first half of 2019. At the same time, Tiangong emphasised in mid-to-high-end products, which led to year-over-year growth of 3.4% and 40.6% in revenue of the die steel (“DS”) and cutting tools segments, amounted to RMB1,138 million and RMB397 million respectively.
Mr. Zhu Xiaokun, chairman of Tiangong International, said: “In the first half of 2020, the Group closely monitored the development of COVID-19 and quickly formulated prevention and control responses to help adapt to changes caused by the pandemic. This helped ensure smooth production and operations, while minimising the impact of the pandemic. With the proficient production capacity, stable operation condition and strong capital markets performance, the Group was officially included as one of the constituent of Hang Seng Composite Index and Shenzhen-Hong Kong Stock Connect in March 2020. The Group achieved multiple technical breakthroughs in the HSK CNC tool-holder technology. In addition, the Group launched a new cutting tool factory in Thailand’s Rojana Industrial Park as a new international footprint. The factory is expected to operate in September 2020 with an annual capacity of 48 million pieces, which could satisfy the needs from overseas markets. This move could strengthen the Group’s influence in the international market.”
The four core businesses reallocated resources based on demand to help maintain profit growth under the challenge of the pandemic
The outbreak of the COVID-19 pandemic posed challenges to the development of the Group’s four core businesses, including DS, high-speed steel (“HSS”), cutting tools and titanium alloy in both domestic and foreign markets. During the period under review, revenue from the four core businesses increased by 4.2% to RMB1,983 million. Gross profit increased by 17.1% to RMB542 million and profits attributable to equity shareholders increased by 41.2% to RMB211 million.
Due to a delay in resuming production in foreign countries, a corresponding supply reduction and associated logistics challenges affected domestic demand for imported DS. Domestic customers were more willing to substitute their demand for imported DS with local products made by domestic suppliers. The Group seized this opportunity to reach new domestic customers in different industries. A significant volume of new orders was reached as a result. Moreover, the demand for melting dies used to produce face masks increased sharply due to the pandemic. As a result, domestic sales volume and average selling price increased by 35.9% and 9.3% respectively. Domestic revenue increased by 48.6% to RMB738 million.
The cutting tools segment includes HSS and carbide cutting tools. The Group’s vertical integration, which extends from upstream HSS production to downstream HSS cutting tools production, provides a significant cost advantage over industry peers. During the period under review, overall sales volume of cutting tools products increased significantly by 29.3% while the average selling price increased by 8.7%. Consequently, revenue from the cutting tools segment increased by 40.6% to RMB397 million. Among them, an increase in overseas markets share led to a 56.9% increase in export revenue to RMB286 million. In the future, the Group will continue to explore domestic and overseas markets for mid-range productions.
Outlook: Aim to be a leading enterprise in the world’s new material
Market environments in the second half of 2020 remain daunting, but the Group will continue to make relevant strategic adjustments, with a focus to penetrate the high-end new material market and develop the powder metallurgy sector, as well as solidifying a place in the 3D printing industry as a supplier of additive manufacturing materials. The Group will consider potential overseas target and plan to deploy the first overseas special steel production base through acquisitions. This step will convert the Group into a material supplier with international production bases. Finally, the Group aims to capitalise on the demands of a wider consumer base by further develop the online sales channel. To support the future development, the Group invested to develop “Digital Tiangong” information technology system to cover all business functions.
Regarding the Group’s coming business opportunities and outlook, Chairman Zhu added: “The Group benefited from rapid growth in the pandemic prevention supplies industry and subsequent need for materials for 5G-related high-end products, demand for special steel is expected to expand. Meanwhile, policies to promote consumption and improve product quality have been introduced. Special steel products have now become an important component of high-precision manufacturing industries such as the “new infrastructure”, the automobile and national defence industries. China’s ‘new infrastructure’ policy and the uncertainty of the global epidemic accelerated the trend of domestic substitution. The special steel industry has entered an important strategic period, encouraging enterprises to upgrade their technology and products. Tiangong International will continue to improve technical and research capabilities, as well as integrate into overseas markets, to realise the Group’s vision for the future: To become a leading enterprise in the world’s new material industry.”
About Tiangong International Company Limited
Founded in 1981, Tiangong International Company Limited (“Tiangong”) has been deeply engaged in innovation, and today it is China’s largest manufacturer of new special alloys and high-end precision tools. Tiangong was listed on the main board of HKEX on 26 July 2007, and became a member of the Hang Seng Composite Index and entered the Shenzhen-Hong Kong Stock Connect on 09 March 2020.
Tiangong’s core products have been included in the national “Strategic Emerging Industry Classification (2018)” in the new materials industry, which included its high-speed steel tools and die steel. Tiangong’s titanium alloy was included as a key strategic material in “Made in China 2025,” and powder metallurgy was included as a cutting-edge new material. The aforementioned products have been widely used in aviation, automotive, marine, high-speed trains, petrochemical and mechanical processing industries. According to the latest report from the world-renowned SMR Steel and Metal Products Market Research Center, Tiangong ranks second within the world’s die steel tool industry.
On behalf of Tiangong International Company Limited, this press release is distributed by Institutional Capital Advisory (Asia). For further details, please contact:
Mr. Wing Lee
Tiangong International Company Limited
Tel: +852 3102 2386
Email: tiangong@biznetvigator.com
Institutional Capital Advisory (Asia) Limited
Tel: +86 (21) 8028 6033
Email: tiangong@icaasia.com