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China Hongqiao Group Limited (¡°China Hongqiao¡± or the ¡°Group¡±; Stock code: 1378) is a  aluminum product manufacturer in China. Located in Shandong Province of China, the Group is mainly engaged in the production and sales of molten aluminum alloy, aluminum alloy ingots, aluminum alloy casting-rolling products and aluminum busbars.

In 2017, with more favorable factors, the global economy experienced recovery with significant adjustment and fluctuation. The stability of China¡¯s domestic macroeconomic was improved. Gross Domestic Product (¡°GDP¡±) of China increased by 6.9% over the same period of the previous year, which continued the steady and favorable development trend. The world¡¯s major economies maintained growth but are facing lots of risks and uncertainties, and the situation is still complicated. The increasing costs, constraints of resources and environment, intensified industrial restructuring, tightened relevant control policies and other profound impacts led to a rigorous environment both internally and externally for industrial upgrading, coordinated development and sustainability. The Group experienced tremendous challenges under such austere situation.

In 2017, in respect of production and operation, the Group has stayed true to the original aspiration to achievesteady development and continued to accelerate the industrial cluster development through the industrial model of ¡°Integration of Aluminum and Electricity¡±, ¡°Integration of Upstream and Downstream Businesses¡± and ¡°Global Integration¡±, enhance the cost advantages and the economies of scale. For overseas businesses, the Group aligned its strategies with the ¡°One Belt One Road¡± initiative of the PRC government to speed up the development in the bauxite project in Guinea, Africa, which enhanced the Group¡¯s ability to allocate resources and global operations, and created an overseas strategy model that was in line with the Group¡¯s development characteristics. Furthermore, the Group continued its strategy of ¡°multi-channels¡± and expanded bauxite supply in Australia, India, Malaysia and other regions. The Group¡¯s alumina project in Indonesia ran well and has been named the ¡°Best Example of International Production Capacity Cooperation of Chinese Enterprises¡± by China Nonferrous Metals Industry Association (¡°CNMIA¡±). The Group continuously enhanced its capability in managing upstream raw materials, which enable the Group to control the costs of raw material effectively.

In 2017, the Group¡¯s revenue amounted to approximately RMB93,312,652,000, representing a year-on-year increase of approximately 52.0%; gross profit amounted to approximately RMB14,883,711,000, representing a year-onyear increase of approximately 4.8%; net profit attributable to shareholders of the Company decreased by approximately 25.3% to approximately RMB5,118,566,000, on one hand, mainly due to the production capacity shutdown resulting from the Group¡¯s response to the relevant policies and plans for the supply side reform of the aluminum industry in the PRC, and goodwill impairment arising from acquisition of Shandong Hongchuang Aluminum Industry Holding Company Limited (¡°Hongchuang¡±), a subsidiary and a joint stock company incorporated in the PRC with limited liability whose shares are listed on Shenzhen Stock Exchange (stock code: 002379) within the Year, and provision for impairment of property, plant and equipment and goodwill amounted to approximately RMB4,828,763,000 and RMB668,694,000 respectively were made during the Year; and on the other hand, the unit costs of aluminum products increased, caused by some of higher raw material prices, resulting in narrowing profit margins. Basic earnings per share amounted to approximately RMB0.6970 (the same period in 2016: approximately RMB0.96). The Board recommended the payment of a final dividend of HK20.0 cents per share for 2017 (2016: HK27.0 cents per share).

During the Year under Review, while the global economy recovered in a tortuous manner, there were still numerous challenges ahead with the mounting geopolitical tensions, which cast a substantial uncertainty on world economic. In face of various institutional adjustments to the deepening of domestic supply side reforms in 2017, the Group adhered to innovations in production technology and actively formulated more prudent and comprehensive corporate governance policies and optimized capital policies and financial structure, and gave full play to the Group¡¯s advantages in business model and cost control; at the same time, paid more attention to high-quality development operations to ensure that the Group can continue stable growth.

During the Year under Review, the Group optimized its capital and financial structure. The Group deepened the strategic corporation with the member enterprises of CITIC Group and entered into a ¡°Headquarter to Headquarter¡± strategic cooperation agreement with China CITIC Bank Corporation Limited (¡°CITIC Bank¡±) at the end of June 2017 in Beijing. Pursuant to this agreement, CITIC Bank will provide a general credit limit of RMB20 billion to the Group in the next two years, as well as integrating various financial resources of CITIC Group to customise financial products for the Group and providing comprehensive financial services. Furthermore, the Group entered into a share placing agreement and a convertible bonds placing agreement with CTI Capital Management Limited and CNCB (Hong Kong) Investment Limited, respectively. The deepened cooperation with CITIC Group will benefits the long-term development of the Group¡¯s operation, indicating the trust and confidence of CITIC Group, one of the China¡¯s largest conglomerates.

In 2017, the global and China consumption volume for primary aluminum increased by approximately 5.7% and 8.1% respectively over the previous year. Considering China¡¯s current economic momentum, with the progressing urbanization in China, escalating city construction and rural consumption integration, the use of aluminum in construction, rail transportation and automobiles will continue to be the key driving forces of the future demand. In addition, it has become even more popular in livelihood applications such as all aluminum furniture and electronic devices, which will also inject new vitality to the Group.

Looking forward, the Group will actively support the implementation of the national supply-side reform; further improve the current industrial model of ¡°Integration of Aluminum and Electricity¡± and ¡°Integration of Upstream and Downstream Businesses¡± to guarantee the supply of bauxite and alumina, explore the downstream application of aluminum and strategically expand marketing channels and establish an environment friendly entire industrial chain of aluminum products. In terms of production technology, more investment will be put in research and development, realizing energysaving and improving the training of employee, maintain the Group¡¯s core competitive edge. For the capital market, the Group will continue to improve the effective communications with investors, make a long-term dividend scheme and continue to optimize the debt structure and reduce the cost of financing act, to strengthen the internal and external risk pervention.

The Group¡¯s industrial planning is at its final phase and stepping into a strategic developing stage for better quality. In addition to maintaining its existing advantages, the Group will identify acquisition opportunities for development of downstream businesses, so as to expand its supply chain and enrich its product range. The Group will further explore the market, strive for sustainable development, reduce costs and enhance efficiency as well as reasonably allocate resources, creating long-term values for shareholders.

All Rights Reserved (c) China Hongqiao Group Limited    Add: Huixian One Road Zouping Economic Development District,Zouping County Shandong Province The PRC
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