Lee & Man profit up 96% to HK457.5mn

Growth is driven by Chemical Business as it capture business opportunities that arise from China’s economic growth.

Lee & Man Holding Limited (“Lee & Man Holding”) announced on Monday its annual results for the year ended 31 December 2010.

During the review period, the Group recorded revenue of HK$2,138.8 million, up 52.4% from last year. The increase was driven by three chemical production lines that were in full operation throughout the year as well as strong recovery of China’s domestic market. The Group’s net profit surged 95.7% to HK$457.5 million, comprising net profit of HK$356.7 million from the chemical business and HK$100.8 million from the handbag business. Earnings per share rose 96.1% to HK55.5 cents (2009: HK28.3 cents). The Board of Directors has recommended the payment of a final dividend of HK13 cents. Together with an interim dividend of HK9 cents per share already paid, total dividends for the year amounted to HK22 cents (2009: HK13 cents).

Ms. Wai Siu Kee, Chairman of Lee & Man Holding, said, “The significant revenue and net profit growth of our chemical business during the year has greatly boosted the Group’s overall performance. Not only bringing respectable investment returns to our shareholders, the outstanding results of the chemical business has laid a strong foundation for its expansion in the future.”

Located in Changshu, Jiangsu Province, China, the Group’s chemical production base possesses an annual capacity of 120,000 tonnes of chloromethane, 160,000 dry tonnes of caustic soda and 120,000 tonnes of hydrogen peroxide. Thanks to increased production capacity and selling prices, gross profit margin of this segment surged from 29.5% in 2009 to 44.5% in 2010, according to a Lee & Man report.

Revenue from the handbag business was HK$853.5 million, up by 17.3% from last year.

Despite the softening of the European and US markets, profit remained stable due to the acquisition of new clients, strengthening of product design capabilities and implementation of effective cost control measures by leveraging the Group’s extensive experience.

The Group has made an application to Hong Kong Stock Exchange regarding the proposed spin-off of its handbag business by way of distribution in specie to existing shareholders. This will ensure a clear delineation between the chemical and handbag businesses, as well as offer fair evaluation and investment flexibility to investors and analysts. The proposed spin-off is subject to the approval by Hong Kong Stock Exchange.

The handbag business will be led by an experienced management team. Expecting the handbag market to stablise, the Group will step up efforts to develop China domestic market and different market segments. It will also explore new customers and rationalise the production processes and internal control in a bid to increase its profitability.

To continue expanding production capacity and capture a greater share of China’s domestic market, the Group will commence operations of its fourth chloromethane production line in March 2011. With a designed capacity of 40,000 tonnes of chloromethane and 60,000 dry tonnes of caustic soda, this will boost total capacity of chloromethane, caustic soda and hydrogen peroxide to 160,000 tonnes, 220,000 dry tonnes and 120,000 tonnes respectively.

The Group’s self-owned pier to be built in Changshu will help effectively lower logistics cost.

Moreover, the Group has entered into a land use rights transfer agreement with the government of Ruichang in Jiangxi Province. The land granted to the Group, encompassing around 1,241 mu, will be used for mid- to long term development of the chemical business.

The Group is also committed to chemical research and development and developing new products to diversify its product offerings such as perchloroethylene and other downstream products.

“Our maturing chemical business will be the growth driver for the Group. We will continue to capture business opportunities that arise from China’s economic growth as well as expand our production capacity, products and business presence in a steady manner. The management will be devoted to implementing well-planned marketing and expansion strategies to yield satisfactory and long-term returns for our shareholders.” Ms. Wai concluded.