China Zhongwang

China Zhongwang Holdings Limited
中国忠旺控股有限公司
Hong Kong Listed Company
Industry Aluminium Processing
Founded 1993
Headquarters Liaoyang, Liaoning, People's Republic of China
Area served
 People's Republic of China
Key people
 chairman: Liu Zhongtian
Website China Zhongwang Holdings Limited

China Zhongwang Holdings Limited (Chinese: 中國忠旺控股有限公司) (SEHK: 01333) is the second largest industrial aluminium extrusion product developer and manufacturer in the world and the biggest one in Asia and China. The group is headquartered in Liaoning province, China.[1]

Principal business

China Zhongwang is principally engaged in the production of high precision, large-section and high value-added industrial aluminium extrusion products which are widely used in transportation (including railway passenger compartments and cargo carriages, metropolitan subway and light rail, automobiles, heavy trucks, vessels, aviation and aerospace) machinery and equipment and electric power engineering sectors. In addition, the Group is developing industrial aluminium deep-processing technologies and actively extending its reach to the high-end aluminium flat rolled product business to fulfill its mission of becoming the world's top comprehensive developer and manufacturer of high-end processed aluminium products.

History and scale

Since its founding in 1993, the Group owned 93 leading aluminium extrusion production lines (including 14 production lines with large extrusion presses of 75MN or above under installation), including a 125MN oil-driven dual action aluminium extrusion press which is one of the largest and the most advanced presses of its kind in China and the world. The Group has built world leading aluminium tilt smelting and casting equipment in the industry, as well as the largest customized industrial aluminium extrusion product die design and manufacturing centre in Asia. As at 30 June 2012, the Group's annual production capacity was over 80 tonnes. The close coordination among the processes, namely product development, smelting and casting, die and extrusion, and the advanced technologies applied is the Group's important source of competitiveness and outstanding features.

Founder and directors

Billionaire Liu Zhongtian is chairman of China Zhongwang Holdings. [2] Liu Zhongtian founded the company in 1993 at age 29. Prior to IPO, Liu Zhongtian held 4 billion shares, or a 74% stake in the business, according to the prospectus. As stated in the offering documents, “Mr. Liu has, and will continue to have, substantial influence over our business. We cannot assure you that Mr. Liu will not cause us to enter into transactions or take, or fail to take, other actions or make decisions that conflict with the interests of our other shareholders.”[3]

Liu Zhongtian’s Net Worth is estimated by Forbes at US$4.3 Billion (as of 2015). [2]

Before founding Group in 1993, he established and served as the Chairman of Liaoyang Factory, Futian Chemical, Liaoning Cheng Cheng and Hong Cheng. He has been the Chairman of China Zhongwang Holdings Limited since August 1, 2008 and has been its Executive Director since January 29, 2008. Mr. Liu received a Diploma in Administrative Management from Liaoning Radio and TV University, China in 2002.[4]

Name Title
Mr. Liu Zhongtian Founder, Chairman, President and Executive Director
Mr. Lu Changqing Vice President, Executive Director and Joint company secretary
Mr. Chen Yan Vice President and Executive Director
Ms. Zhong Hong Vice President and Executive Director
Mr. Gou Xihui Vice President and Executive Director
Mr. Wong Chun Wa Independent non-executive director
Mr. Wen Xianjun Independent non-executive director
Mr. Shi Ketong Independent non-executive director
Mr. Lo Wa Kei, Roy Independent non-executive director
Mr. Cheung Lap Kei, Vincent chief financial officer and Joint company secretary

Financial performance

For the six months ended 30 June 2014 the Group's revenue and profit attributable to shareholders amounted to approximately RMB7.95 billion (corresponding period in 2013: approximately RMB7.02 billion) and RMB1.27 billion (corresponding period in 2013: approximately RMB1.07 billion), representing a year-on-year growth of 13.2% and 18.6%, respectively.

Sales of aluminium extrusion products grew by 16.5% year on year to approximately 368,000 tonnes. China remained the major market of the Group, where sales volume and revenue grew by 13.0% and 9.3% year on year to approximately 323,000 tonnes and approximately RMB6.75 billion, respectively, representing 84.9% of total sales (corresponding period in 2013: 87.9%). Driven by exports of deep-processed industrial aluminium extrusion products, the volume and amount of sales in the overseas markets grew by 50.7% and 41.2% respectively year on year to approximately 45,000 tonnes and approximately RMB1.20 billion.[5]

RESULTS

Year ended 31 December (in RMB'000) 2011 2010 2009 2008 2007
Revenue 10,305,694 10,521,948 13,852,708 11,264,429 7,521,266
Profit for the year attributable to owners of the Company 1,105,027 2,595,867 3,528,815 1,910,438 852,158

ASSETS AND LIABILITIES

As at 31 December (in RMB'000) 2011 2010 2009 2008 2007
Total assets 27,774,599 24,639,885 24,423,450 12,861,075 11,012,758
Total Liabilities 12,097,070 9,066,279 10,247,677 9,655,999 7,718,120
Total equity attributable to owners of the Company 15,677,529 15,573,606 14,175,773 3,205,076 3,294,638

Products and plants

Industrial aluminium extrusion products, deep-processing of industrial aluminium extrusion products and aluminium flat-rolled products are the three core businesses of the company. China Zhongwang adopted an integrated business model to strengthen its core competency:

Die design and manufacturing

Alloy smelting and casting

Large advanced extrusion equipment

Product development

Listing

China Zhongwang was listed on the Hong Kong Stock Exchange in May 2009 with its IPO price of HK$7.0 per share.[6] It was the world's largest IPO in that year and raised the capital of US$1.26 billion.[7][8]

Yet the fame of China Zhongwang has been widely fading since Sept. 14, when mainland Chinese newspaper The Economic Observer reported that some customers named in Zhongwang’s IPO prospectus did not order aluminum products from Zhongwang in 2008.

The newspaper publicly apologized two days after the article was published, and Zhongwang further invited management representatives from four of its major customers to hold a joint video press conference to vouch for their business relationships with Zhongwang as disclosed in its prospectus.

Nevertheless, investors and analysts, following China Economic Observer, also began to question the accuracy of Zhongwang’s listing documents.

Securities firm Cazenove conducted its own checks with some of Zhongwang’s customers listed on the prospectus. Among them, a spokesperson, Mr. Yang of automotive components maker Lingyun Industrial Corp., confirmed the company is buying from Zhongwang but said that aluminum-extrusion-product volume was very small.

To attempt to regain investors’ sinking confidence in the company, China Zhongwang hired Ernst & Young as an external auditor to conduct an independent review of the sales transactions with its 10 major customers during the period from Jan. 1, 2008 to June 30, 2009.[9]


The stock has plunged more than 50% since IPO. Investors that bought that IPO at about HK$7 per share have lost money: 24 Feb 2015 close was HK$3.18[10]

Overseas operations

According to press-reports, China Zhongwang Holdings Ltd. has been involved in the practice of exporting extrusions from China and remelting them back into billet, in particular, at Aluminicaste Fundición de México S de RL de CV facility in Mexico in order to further sell this metal to American and other markets as primary aluminium.[11]

Aluminicaste president and chief executive officer ZP Liu also is president and chief executive officer of China Zhongwang Holdings Ltd.[11]

In summer 2014, US aluminum extruders expressed concerns over a massive stockpile of aluminium extrusions amounting to 850,000 tonnes being stored at Aluminicaste facility in San José Iturbide, Mexico, and initiated Antidumping and Countervailing Duty Administrative Reviews.[12][13] Market participants were unclear why extruded shapes from China would be remelted back into billet in Mexico, largely because that type of manufacturing process is generally considered to be entirely cost-prohibitive.

According to market participants, Zhongwang was casting commercially pure aluminium into billet, turning it into an extruded shape in China and shipping it out of PRC as 6063 extrusion. This allowed Zhongwang to capture an 11-percent rebate from the Chinese government. ‘The rebate is reserved for extrusions destined to become a product, not remelted into billet. If that is in fact the case, the big question becomes what Zhongwang charges Aluminicaste for the extrusions since Zhongwang is essentially selling the material to itself.’ The practice of importing extrusions from China and remelting them into billet is not illegal or known to violate any law, but extruders were concerned that Aluminicaste could be looking to circumvent anti-dumping duties.[11]

In summer 2014 Zhongwang Holdings was seeking approval for a $1.5-billion extrusion plant in Barstow, California, US. But according to Barstow city manager Charles C. Mitchell, the project was unlikely to reach the development stage. Scuderia, members of the Barstow City Council and China Zhongwang Holdings have not detailed the potential future relationship between Aluminicaste and the Barstow Aluminum project, although sources familiar with the matter claimed that billet from the Mexican facility would have likely been shipped to Barstow to be extruded.[14]

Special announcement

In October 2011, China Zhongwang announced major transactions in relation to the development of the synergistic aluminium flat rolled product business. The Group kick-started the development of the project as per its plan and entered into a total of six equipment purchase agreements with three independent third party suppliers via two wholly owned subsidiaries. According to the agreements, the Group will invest approx. USD3.8 billion (approx. HKD29.5 billion) in total payable in four instalments between 2011 and 2014 for the purchase of hot continuous rolling mills and cold rolling mills for the production of medium-to-high thickness plate and sheet products, smelting and casting lines, quenching furnaces and heat treatment furnaces for the ancillary production of medium-to-high thickness plate and sheet products, and aluminium foil rolling mills, amongst others, for Phase 1 development of the aluminium flat rolled manufacturing base which will have an annual production capacity of 1.8 million tonnes.

And in November 2011, through Panjin Zhongwang Aluminium Co., Ltd., a wholly owned subsidiary of the Company, China Zhongwang won the bid for the usage right of two pieces of land in Panjin City, Liaoning Province through public auction at a total consideration of RMB643 million. The Land will be used for the construction of the new facility for the manufacturing of aluminium flat-rolled products in Panjin City.

References

  1. ↑ = China Zhongwang Company Overview
  2. 1 2 Liu Zhongtian's Forbes profile
  3. ↑ Billionaire Behind 2009's Biggest IPO - Forbes
  4. ↑ China Zhongwang Holdings Ltd Executive Profile - Bloomberg
  5. ↑ China Zhongwang Holdings Limited Interim Report 2014
  6. ↑ China Zhongwang debuts below IPO price
  7. ↑ China Zhongwang IPO to raise up to $1.6b
  8. ↑ Chinese IPO Is the Biggest This Year
  9. ↑ Chinese Aluminum Maker Under Fire - Forbes
  10. ↑ CHINA ZHONGWANG stock price at HKE
  11. 1 2 3 Nathan Laliberte (3 July 2014). "Aluminicaste's 850,000t stockpile a concern". American Metal Market. Retrieved 13 February 2015.
  12. ↑ Nathan Laliberte (22 July 2014). "US aluminium extruders weighing trade action". American Metal Market. Retrieved 13 February 2015.
  13. ↑ http://www.gpo.gov/fdsys/pkg/FR-2014-06-27/html/2014-15165.htm Initiation of Antidumping and Countervailing Duty Administrative Reviews - U.S. Department of Commerce
  14. ↑ Nathan Laliberte (27 August 2014). "Barstow aluminum project unlikely to proceed". American Metal Market. Retrieved 13 February 2015.

External links

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