(Hong Kong, 17 December, 2003) Shui On Construction And Materials Limited ("SOCAM", stock code: 983) today announced that the Group's unaudited consolidated profit after taxation and minority interests for the six months ended 30 September 2003 was HK$14 million, compared with a loss of HK$16 million in the same period last year. Turnover was HK$1,300 million, an increase of 10% compared with the same period in 2002. The Directors of the Group did not recommend the payment of an interim dividend.

According to SOCAM Chairman Mr Vincent H S Lo, the overwhelming sales response to Rui Hong Xin Cheng (RHXC) - a quality housing development targeted at Shanghai's fast emerging middle class - in October should translate into a considerable profit contribution for the second half of the financial year, and the Group's cement operation in Chongqing and Guizhou should also see improved profit margins in the coming months. However, although Hong Kong's economy is gathering momentum for a recovery, the Group's local construction and materials businesses are not expected to benefit much in the short term due to dwindling public housing contracts available for tender.

Following the topping out of the first seven residential towers in the current phase of RHXC in July, the 816 units there were put to market in October. Nearly all have been sold instantly, at an average price of over RMB7,900 per square metre. The practical completion certificate for these units is expected in March 2004, thus allowing a sizeable profit to be realized in the second half of the financial year. Another 660 units of the current phase are scheduled to be on sale in the middle of 2004.

"The encouraging market response reflects not only the high quality and popular design of Rui Hong Xin Cheng, but also the buoyant property market in Shanghai. With China's accession to the World Trade Organization and the 2010 World Expo in Shanghai, I believe the economy and real estate market in Shanghai and many major Mainland cities will continue to grow steadily. As we announced on 18 November, SOCAM is in discussion with the holding company of the Shui On Group to co-invest in a premier Mainland real estate company. If the independent shareholders approve this investment, I believe SOCAM will benefit from the diversified real estate portfolio and strong reputation of the private group in the Mainland and will be in a good position to exploit the vast opportunities there," added Mr Lo.

The expansion of the Group's cement operation in Chongqing and Guizhou continues amid the Central Government's substantial investments in infrastructural and power generating projects, with combined annual production capacity currently at around seven million tonnes. While demand for high grade cement in these locations continues to increase rapidly, SOCAM's emphasis on building up market share in the last six months has meant that some of the plants have yet to generate substantial profit contributions.

"The strengthening of our production capacity and our significant market presence in the Chongqing and Guizhou high grade cement markets should bear fruit in the next financial year and a markedly higher profit contribution should be seen by then. In Chongqing, we're modernizing our existing cement operations as well as building two modern dry kilns, each with an annual capacity of around one million tonnes. We are also talking to two strategically located plants in Guizhou and negotiations are likely to be concluded in the first half of next year," Mr Lo said.

In Hong Kong, the decline in public housing contracts available for tender due to the suspension of the Home Ownership Scheme and an excess of public rental units built in previous years severely affects the workload for SOCAM's construction division. Works from the Architectural Services Department now account for close to half of the division's turnover. The depressed construction market in Hong Kong also affects the sales and gross margins of the Group's construction materials operations in Hong Kong and the Pearl River Delta.

At 30 November 2003, the gross and outstanding value of contracts on hand for the Group's building division amounted to approximately HK$5.4 billion and HK$3.2 billion respectively (November 2002: HK$4.8 billion and HK$3.7 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, Hangzhou, Chongqing, Beijing, Guangzhou and New York.