Huazhang Technology Announces 2017/18 Annual Results Net Profit Increased by 57.8%

Optimizing role of providing all-encompassing
services for paper-making industry

Sharing
and working together for win-win results

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Result
Highlights

 

• Revenue
  increased by 47.1% to approximately RMB612.1 million
• Gross profit
  and net profit reached approximately RMB137.3 million and
  RMB47.9 million, respectively,
  representing a y-o-y increase of 49.9% and 57.8%, respectively
• New contract value increased by more than 51.4% to approximately
  RMB1,141.3 million
• Synergy
  growth
  through the acquisition of the headbox
• Optimized the
  role of providing all-encompassing services as provision for a breakthrough
  for the environmental business,
  involving reverse hanging membrane
  sealing and deodorization for the sewage tank of a paper-making plant, and a
  RDF product project
• Began to deliver
  supply chain financing services to the paper-making companies in March 2018
• The Board recommends the payment of a final dividend of 3.0 HK cents per share.

 

Financial Highlights

	Year ended 30 June
RMB	2018	2017	Change
Revenue	612,123,000	416,007,000	+47.1%
Gross profit	137,257,000	91,592,000	+49.9%
Gross profit margin	22.4%	22.0%	+0.4 ppt
Profit for the year	47,901,000	30,358,000	57.8%
Net profit margin	7.8%	7.3%	+0.5 ppt
Profit attributable to owners of the parent	48,285,000	30,639,000	+57.6%
Earnings per share attributable to ordinary equity holders of the parent (RMB cents per share) – basic – diluted	7.18 7.18	5.10 5.10

 

HONG KONG, CHINA - Media OutReach - 21 September 2018 – Huazhang
Technology Holding Limited (“Huazhang” and its subsidiaries, together, the
“Group”, stock code: 1673) announced its annual results for the year ended 30 June 2018 (“the year
under review”) today. The
Group’s revenue for the year under
review amounted to approximately RMB612.1million (the year ended 30 June 2017: RMB416.0 million), representing an increase of 47.1%. Profit attributable to owners of the
parent increased by approximately 57.6% to RMB48.3 million (the year ended 30 June 2017: RMB30.6 million). Non-GAAP profit for the year amounted to
approximately RMB56.7 million,
representing an increase of 49.0%.

 

The Board recommends the payment of a
final dividend of
3.0 HK cents per share. The Group has
paid final dividends every financial year from 2014, with payout ratios at around
40%.

 

Business Review

During
the year under review, the paper-making industry continued to benefit from an
array of economic and environmental reform and development policies of the
Chinese government. The demand-supply relationship further improved and the
prices of paper-making rose. The paper-making industry in China reaped a bumper
harvest. The Group actively facilitated the corporate affairs as well as
business by upholding the policy principles of “New Huazhang, New Development,
New Dream” and creating a new vision of “Integrating Together, Creating
Together, Generating Profits Together”. The
Group played the role of providing all-encompassing services to maximize the
interests by sharing, creating together and working together for win-win
situation. For the year ended 30 June 2018, the Group recorded a turnover and profit
of approximately RMB612.1 million and approximately RMB47.9 million,
respectively, representing an increase of approximately 47.1% and
approximately 57.8% as compared with the same period in
2017. The Group’s new contract value increased by more than 51.4% to
approximately RMB1,141.3 million.

 

During
the year under review, revenue from sales of industrial products increased by
approximately 57.8% to
approximately RMB121.7 million. Revenue from project contracting services
remain decreased by 8.3% to approximately RMB215.9 million.
Revenue from sales of environmental business was increased by 105.3% to
approximately RMB99.8 million. Revenue from provision of supporting services
increased by approximately 218.6% to approximately RMB174.7million.

 

“Integrating
Together” — optimize the role of providing all-encompassing services for the
paper-making industry

 

During the
year, the Company continued to integrate suppliers and service providers from
all sectors of the paper-making industry, and optimized the role of providing
all-encompassing services for the papermaking industry through the acquisition
of the headbox and logistics businesses. In September 2017, the Group completed
the acquisition of Hangzhou MCN Paper Technology Co., Ltd. and Hangzhou Haorong
Technology Co., Ltd. (together, the “MCN Group”). MCN Group owns patents and
know-how in the headbox production. In November 2017, the Group completed the
acquisition of Fu An 777 Logistics Limited (“777 Logistics”, together with its
subsidiaries, collectively known as the “777 Logistics Group”). The 777
Logistics Group is principally engaged in the logistics and warehouse
businesses, and has established a logistics and warehouse centre in Yangjiang
City, Guangdong Province, China, which officially commenced operation from July
2018. To optimize
the role of providing all-encompassing services, the Group worked together with
a software company to launch an information-based project, so as to integrate
design and production for transparent management.

 

“Creating
Together” — create new opportunities for development

 

The Group
worked together with suppliers and service providers to create new
opportunities for development. Taking the headbox business as an example, its
headbox products maintained advantages in the sector of printing paper,
specialty paper and household paper by relying on the technology and service
advantages of the MCN Group. The Group even succeeded in introducing its
headbox in the market for packaging paper to strengthen its advantages. During
the year, in addition to delivering the previous businesses for sludge
treatment products and wastewater treatment, the Group also undertook a project
involving reverse hanging membrane sealing and deodorization for the sewage
tank of a paper-making plant, and a RDF product project for a paper-making
plant. Upon completion of these projects, the Group possessed the technology in
solving the odor problem of paper-making plants and in converting waste residue
from paper-making as raw materials into fuel rods. These projects were
demonstration projects of the Group and can be further promoted to existing
customers in the future. Moreover, the Group began to deliver supply chain
financing services to the paper-making companies in March 2018 to assist them
in sourcing raw materials and to provide financing services through the Group’s
platform and its close relationships with suppliers.

 

During the
year, the overseas business division of the Group actively explored the
overseas markets. In the second half of 2017, the Group secured a master
contractor contract in respect of slurry, flowing white water recovery system
and automation equipment for the 250,000 tons paper machine project of a
paper-making plant in Vietnam. In the past year, the Group’s sales personnel
visited a lot of customers in overseas countries or invited overseas customers
to conduct site visits to the Company. The Group believes that the overseas
markets are full of opportunities. For the year ended 30 June 2018, the new
contract value of the overseas business division was RMB 5.6 million.

 

“Generating
profits together” — collaborate for common benefits

 

The Group
created common benefits by working with all parties to optimize its role of
providing all-encompassing services. During the year, the Group’s new contract
value increased by more than 51.4% to approximately RMB1,141.3 million, thanks
to the contribution by the headbox business, in addition to the market boom.
For the year ended 30 June 2018, revenue from industrial products increased by
approximately57.8% to RMB121.7, of which
revenue from the headbox business was approximately RMB32.1 million. Moreover,
in terms of project contracting services, with the efforts made by the Group
over the past few years, it manages to undertake projects with increasing
degree of complexity and increasing contract value. For the year ended 30 June
2018, the new contract value of major projects was RMB794.4million, an increase
of 55.1% over 2017. For the year ended 30 June 2018, the new contract value of
environmental products was RMB 102.5 million, an increase of 27.1% over 2017.

 

Looking ahead, Mr. Zhu Gen Rong, the chairman of Huazhang Technology Holding Limited, said, “We expect the paper-making industry
is expected to continue its positive momentum, while the
market demand for papermaking equipment will keep increasing. The Group is
confident in and capable of playing a good role of providing all-encompassing
services for the industry by recommending quality equipment suppliers to
customers through the platform of Huazhang Technology. We will step up efforts
in innovation as well as research and development, enabling “Made in China” to
include more China created elements and rely more on Chinese equipment and
Chinese brands, so that China will become one of the nations that provides
complete equipment for the paper-making industry. We will seize the
opportunities and challenges encountered by the paper-making companies, make
timely response to the new direction of “Integrating Together, Creating
Together, Generating Profits Together” with appropriate adjustment of
strategies so as to take the lead in the market and deliver sustainable
business growth for creating more values for all parties.”

  

About Huazhang Technology Holding
Limited

Huazhang
Technology Holding Limited is an integrated service provider in paper-making
industry and its principal business includes project contracting service,
research and development, manufacture and sale of industrial automation
systems, sludge treatment products and headbox, and after-sales and add-valued services.
The Group has been in the paper-making industry for over 17 years. The Group’s
self-manufacturing system and equipment are custom-built in accordance with the
specifications and requirements provided by the Group’s customers, which
include various papermaking enterprises in the PRC. The group strives to become
a leading solution provider and comprehensive service provider for the
papermaking industry in the PRC.