(Hong Kong, 12 December, 2002) Shui On Construction and Materials Limited (“SOCAM”, stock code: 983) today announced its financial results for the six-month period ended 30 September 2002. The Group’s quality housing development and cement businesses in the Chinese Mainland continue to make good progress and are expected to start contributing significantly to the bottom line within two years. However, the continuous decline in Hong Kong’s construction and construction materials markets continues to affect the Group’s earnings. Over the six-month period ended 30 September 2002, turnover was HK$1,180 million, down 41% from the corresponding period last year (2001: HK$2,002 million). Loss attributable to shareholders was HK$17 million. The Directors of the Company did not recommend the payment of an interim dividend.

“Amid the extremely difficult local economic environment, the property and construction sectors are experiencing the most severe and extended downturn in Hong Kong’s history. In the past six months, the drastic reduction of public and private sector works has further intensified the already very severe competition, and tender prices at negative margins were not uncommon. The situation is unlikely to improve in the short term,” said Mr Vincent H S Lo, Chairman of SOCAM. “The suspension of the Home Ownership Scheme is expected to bring a further reduction in works for our construction division.”

Mr Lo emphasised that despite the adverse market conditions, SOCAM will continue to actively bid for Architectural Services Department projects and other construction works in Hong Kong as well as adopt rigorous cost-cutting measures to maintain its competitiveness. With encouraging developments in the company’s business ventures in the Chinese Mainland, he is confident that a return to profitability should occur in the next financial year barring unforeseen circumstances.

SOCAM is applying its Hong Kong construction experience and expertise in the development of Rui Hong Xin Cheng, a quality housing development targeted at Shanghai’s fast emerging middle class, and substantial savings on construction costs have already been attained. Piling works for blocks 1 to 7 and the commercial area in the current phase have been completed. Construction of the superstructure with a total gross floor area of more than 90,000 square metres should be completed by early 2004.

Mr Lo added, “The award of the 2010 World Expo to Shanghai not only underlines the city’s rising importance in the global economy, but will also boost the already buoyant economy and property market, especially in the middle- to high-income segment. Rui Hong Xin Cheng is an established name for quality housing in Shanghai and the upcoming pre-sale in mid 2003 should kick off a long term trend of steady turnover and profit contribution to the company. We are also conducting a preliminary feasibility study on the mass housing market in other parts of the Chinese Mainland. It could open up huge potentials for SOCAM if the result of the study is positive.”

SOCAM’s cement operations in the central and western provinces have started to provide healthy profit contributions. With a combined annual production capacity of six million tonnes of high grade cement, the company is now among the top three cement producers on the Mainland. The acquisition of Qujiang Cement, one of the four major cement producers in Sichuan Province, was completed in early November. This one-million-tonne operation will provide an important foothold for Chongqing TH Cement to penetrate into the market in central and northern Sichuan. It now has a combined annual production capacity of 4.5 million tonnes and accounts for more than 80% of the high grade cement market in and around Chongqing. It is constructing a number of clinker-grinding mills to enlarge its distribution network and market reach.

In line with SOCAM’s fast expansion in Guizhou, TH Cement (Guizhou) Group was renamed Shui On Cement (Guizhou) Group in November. With the large number of infrastructure projects in the province, production has at times been unable to keep up with demand. The company’s two new dry rotary kilns in Zunyi and Qianxinan, each with an annual capacity of 400,000 tonnes, have been completed and production has started earlier this month, bringing the combined annual capacity up to 1.5 million tonnes. A preliminary agreement was signed in early December to acquire Guiyang Cement, one of the two major producers in the provincial capital. Total annual capacity will rise to 2.2 million tonnes upon completion of this acquisition. Negotiations on the acquisition of other important cement entities in central and western Guizhou are also underway.

“Under the ‘Go West’ policy, Guizhou continues to rank among provinces with the highest year-on-year increases in central government funding this year. Chongqing, as the leading city in the Central and Western region, will see a colossal inflow of investments, and Chongqing TH is well positioned to capitalise on the vast expansion being planned for the years to come. We are therefore confident of these markets and will continue to expand our cement operations there,” said Mr Lo.

Against the difficult market conditions in Hong Kong, SOCAM managed to secure only a small number of projects from the Housing Authority (HA) in the past six months, totalling only HK$190 million. The company had greater success with projects from the ASD, winning two new contracts totalling HK$740 million. Nevertheless, as at 31^st November 2002 the gross and outstanding values of construction contracts on hand were HK$4.8 billion and HK$3.7 billion respectively, which were at much lower levels compared with last year (November 2001: HK$8.1 billion and HK$4.5 billion respectively).

Shui On Construction and Materials Limited (SOCAM), a member of the Shui On Group, was listed on the Hong Kong Stock Exchange in 1997 and is engaged in construction, construction materials and property development in Hong Kong and the Chinese Mainland. Apart from SOCAM, the Shui On Group has a separate, non-listed property arm with investments in Shanghai, Hong Kong, Beijing, Guangzhou and New York.