Following the trend of lightweight vehicles in the automotive industry

Developing support measures for new energy vehicles

Result Highlights

Revenue increased by 6.2% to approximately RMB339.9 million

Gross profit and net profit reached approximately RMB103.1 million and RMB49.4 million, respectively, representing a y-o-y increase of 9.5% and 17.6%, respectively

Sales from cylinder blocks reached RMB288.0 million, representing a y-o-y increase of 9.7%

Added a low-pressure casting production line for design and manufacturing of lightweight and high-quality castings of new energy vehicles, which is expected to officially commence operation in January 2019

Carrying out research and development on 6 products to meet future development opportunities of new energy vehicle business

Conducted new investment and transformation of a total of 4 production lines

Interim dividend of HK6.85 cents per share

HONG KONG, CHINA, - 31 August 2018 - Ruifeng Power Group Company Limited ("Ruifeng Power" or the "Company" and its subsidiaries, together, the "Group", stock code: 2025.HK), a Chinese leading specialized manufacturer of cylinder blocks (a major structure in automobile engines), announced its interim results for the six months ended 30 June 2018 ("the period under review") today. 

The Group's revenue for the period under review amounted to approximately RMB339.9 million (the six months ended 30 June 2017: RMB319.9 million), representing an increase of 6.2%. Total comprehensive income attributable to equity shareholders of the Company increased by approximately 16.5% to RMB48.9 million (the six months ended 30 June 2017: RMB42.0 million). Gross profit increased 9.5% to RMB103.1 million, while gross profit margin increased to 30.3% (the six months ended 30 June 2017: 29.4%).

The Directors declared an interim dividend of HK$6.85 cents per share for the six months ended 2018 (six months ended 30 June 2017: Nil).

Business Review

The automobile industry in China has exhibited stable growth in the first half of 2018. According to the data published by China Association of Automobile Manufacturers, in the first half of 2018, the production volume of China's passenger and commercial vehicles increased by approximately 3.2% and approximately 10.6% y-o-y. Under the pressure of the double-credit-point policy, which was announced in the first half year of 2018, automotive companies are already riding the wave of comprehensive planning for new energy vehicles, and it is also the trend of the times. 

In addition, in May 2018, the Ministry of Finance of the PRC officially announced that since 1 July 2018, the import tariffs on finished vehicles and parts have ushered in major adjustments. This adjustment will bring new challenges and opportunities for Chinese car companies and auto spare parts manufacturers.

During the period under review, the Group has seized the development opportunities of the automobile industry and achieved sustained growth, creating desirable return for shareholders. In the first half of 2018, the Group recorded sales revenue and profit of approximately RMB339.9 million and RMB49.4 million respectively, representing an increase of approximately 6.2% and 17.6% respectively over the same period last year. 

Among which, sales from cylinder blocks reached RMB288.0 million, representing a y-o-y increase of 9.7%, while sales volume was 315,361; sales from cylinder heads reached RMB34.6 million, while sales volume was 58,874; sales from ancillary cylinder block components reached RMB17.4 million, representing a y-o-y increase of 47.7%.

Improvement of Casting Technology

In order to realize cost advantages and quality assurance, the Group continued to strengthen its precision casting production lines. During the period under review, the Group's investment in precision casting production lines of RMB5.0 million was mainly used to add a low-pressure casting production line for design and manufacturing of lightweight and high-quality castings of new energy vehicles for production of aluminum cylinder block products. 

The production line is expected to officially commence operation in January 2019, which would enable the Group to further control the cost and quality of aluminum product production and enhance the competitiveness of the Group in aluminum products. 

Meanwhile, the rough cast products produced by the Group used in the production of cylinder blocks represented 72.3% of the total cylinder blocks the Group produced, a significant increase from 40.0% in the same period of last year. This helped improve the profitability of the Group.

New Energy Vehicle Business

The implementation of the double-credit-point policy by the Ministry of Industry and Information Technology of the PRC would accelerate the industry development of pure electric vehicles and plug-in hybrid electric vehicles and the Group has taken actions in response to the demand. Since 2017, the Group has launched 2 cylinder blocks for commercial vehicles, 4D30 and VM2.5, which meet the new China VI emission standards. 

With an aim to further follow the trend of lightweight vehicles in the automotive industry, the Group has invested in rough cast aluminum casting production lines for future production of lightweight cylinder blocks and cylinder heads. 

Currently, the Group is carrying out research and development on 6 products to meet future demand. The Group has been seeking to develop new energy vehicle business and explore the possibility of developing spare parts for pure electric vehicles, including selecting suitable companies or partners for investment so as to achieve common development.

New Production Line

During the period under review, the Group has strengthened communication and cooperation with customers. In addition to the consolidation of the existing customer base, the Group continued to develop new businesses, including new investment and transformation of a total of 4 production lines. As at 30 June 2018, the Group owned and operated a total of 3 precision casting lines and 19 mechanical processing lines, including 15 for cylinder blocks, 2 for cylinder heads and 2 for other ancillary cylinder block components.

Looking ahead, Mr. Meng Lianzhou, the chairman of Ruifeng Power Group Company Limited, said, "In the first half year of 2018, despite the continuous introduction of new policies in the automobile market and the challenges of electric vehicles for traditional vehicles, we still adheres to customer-oriented and technology-oriented strategies, continuously improving its comprehensive competitiveness and providing high-quality services for traditional car companies. 

At the same time, the Group is gradually developing support measures for new energy vehicles while accurately grasping market trends, and improving production efficiency through internal technological transformation. By enhancing our core competence, the Group will create more value for shareholders. " (mor/roc).