Stable Plastic Piping System BusinessInsists its Prudent Business Strategy Keep Refining its Mainstay Products Proactively Develops Overseas Market
Hong Kong, China, 26th Apr 2024 – China Lesso Group Holdings Limited (“China Lesso” or the “Group”, SEHK stock code: 2128), a leading large-scale industrial group that manufactures piping and building materials in China, announced its annual results for the year ended 31 December 2023 (the “Year”).
In 2023, the economy and investment in China still faced myriad challenges. Particularly, the property sector remained in a trough while the capital market became volatile and complicated. Nevertheless, China Lesso forged ahead with its development and adhered to the principle of prudent business operation by further developing its mainstay business, fortifying its market position and maintaining the quality standards. It demonstrated resilience by maintaining steady business development. Its revenue remained flat at RMB30,868 million for the Year. Gross profit was RMB8,121 million and gross profit margin remained flat at 26.3%. These changes were resulted from (i) an increase in total sales volume of plastic piping systems business which benefited from the timely adjustments to its average selling prices arising from a decline in the cost of raw materials during the Year; and (ii) an increase in revenue contribution from other businesses with less gross profit margin.Profit attributable to owners of the Group was RMB2,368 million. Basic earnings per share were RMB0.77. The Board recommended the payment of a final dividend of 20 HK cents per share for the year ended 31 December 2023.
Plastic piping systems business has always been the main business of the Group. In 2023, China Lesso capitalised on the ongoing demand for infrastructure construction on the back of the state policy and economic recovery by proactively developing and expanding its piping business. It not only kept refining its mainstay products but also innovated both its products and technology, thus enhancing its core competency and expanding its market share. Meanwhile, the Group continued to strengthen its strategic partnerships with government departments and leading central government-owned and state-owned infrastructure construction enterprises by proactively participating in projects of national development plan and urban redevelopment projects. The Group thus achieved synergies with its strategic business partners and consolidated its leading position in the piping system market. The plastic piping systems business demonstrated stable performance, recording revenue of RMB24,585 million, accounting for 79.6% of the total revenue of the Group. During the Year, the Group adjused its sales strategy according to the market conditions and further diversified its product portfolio, boosting the sales of its plastic pipes and pipe fittings, with a 10.6% increase year on year to 2.647 million tonnes in sales volume. During the Year, the Group was able to maintain its gross profit margin at a reasonable and healthy level of 28.5% due to a gradual decline in raw material prices, its adoption of effective procurement strategies and timely adjustments to the selling prices as well as its economies of scale.
As a leading enterprise in the piping industry, the Group aims to develop its intelligent manufacturing capability by the establishment of smart factories through adopting such technologies as the Internet of Things, intelligent manufacturing and automated production in order to enhance its production capability. During the Year, the Group’s annual designed capacity for plastic piping systems was 3.21 million tonnes, and the capacity utilisation rate was approximately 79.4%. Intelligent manufacturing not only improves efficiency but also effectively reduces carbon emissions and pollution, thus blazing a trail for the piping industry’s green and low-carbon practices, bringing advantage to production and sales, creating a win-win situation for both the economy and environment, and adding new impetus and new advantages to high-quality development.
While focusing on the development of its piping business, the Group extended the scope of the applications of its piping systems and provided products, facilities and solutions of high standards for large-scale planting by leveraging its business advantages and research and development capabilities. The Group proactively contributed to agricultural modernisation during the Year by stepping up its research and development of agricultural facilities. It further developed modern technologies and applied its products and technologies into agriculture, animal husbandry, marine aquaculture, thus facilitating the modernisation and upgrading of traditional agriculture and accelerating China’s rural revitalisation while enriching its revenue source and expanding its market share.
In 2023, new business opportunities were expected to arise as international commerce gradually returned to normal. The Group proactively developed overseas markets, tapping into the huge domestic demand and grasping the opportunities for infrastructure construction there on the one hand, and increasing the influence and penetration of its brand there on the other hand. During the Year, the Group accelerated the localisation of its brand in overseas markets and further developed the Southeast Asian market. Currently, the Group’s production bases in Indonesia, Cambodia, Thailand and Malaysia have already been put into operation while those in the Philippines, Bangladesh and Vietnam are under preparation for construction, providing more room for the Group’s development.
In the future, the Group will continue to strengthen its strategic partnerships with government departments as well as leading central government-owned and state-owned infrastructure construction enterprises by proactively participating in projects of national development plan and urban redevelopment projects, with the aim of achieving synergies with its strategic business partners and consolidating its leading position in the piping market. Furthermore, the Group will continue to make innovation the core driving force behind its development, and keep innovating its products, services and business model. It will also further develop its intelligent manufacturing capability, enhance its sustainable development capability and facilitate the high-quality development of its business.
In view of the building materials and home improvement business, in 2023, China’s property sector was undergoing adjustment at a trough and the sector still laboured ahead under downward pressure. Furthermore, home buyers’ confidence remained weak, leading to consistently sluggish sales and impeding a recovery in the market. As a result, the building materials and home improvement industry was also affected to a certain extent. During the Year, revenue from building materials and home improvement business was RMB2,839 million, accounting for 9.2% of the Group’s total revenue. As the central government-owned and state-owned enterprises had an advantage of ample capital and were more resilient, making them key players in the property sector. To mitigate business risk, the Group proactively diversified its client base by pursuing more projects led by the government and state-owned enterprises and by decreasing the proportion of civilian-owned property companies in its client base.
In 2024, as the policies on the supply and demand sides are implemented in synergy and the policy on facilitating property firms’ ability to raise funds is likely to be fine-tuned and implemented, as such, the number of factors favourable to the property market’s development is increasing. Such policies are expected to yield results so the property market is likely to bottom out gradually. The Group will continue to focus on product quality and enhancing its one-stop total solution and services. It will help promote healthy, green construction with its diverse, high-quality building materials and home improvement products and services. Meanwhile, the Group will grasp opportunities in property construction projects and optimise its client mix by proactively engaging new clients with strong financial position so as to boost sales.
The Group operates in several sectors, including environmental protection, supply chain services, and new energy. Despite a slower-than-expected economic recovery in China affecting project numbers and industrial output, the environmental protection business saw steady progress, achieving a revenue of RMB387 million.
Mr. Wong Luen Hei, China Lesso Chairman and Executive Director said, ‘‘China’s economy will continue to face myriad challenges in 2024, but it is likely to stay on track for improvement as the macroeconomic policies gradually yield results and the industries undergo steady transformation and upgrading. China Lesso will adhere to its original aspiration and the principles of the prudent operation and development of business. It will seek to innovate with prudence and drive development with innovation. The Group will further develop its capabilities for intelligent manufacturing and green production, continue to explore opportunities in its mainstay business and enhance synergy across its diverse businesses. Meanwhile, it will pursue the upgrading and innovation to keep up with the market trends, enhance its brand strength, and add impetus into its high-quality development. The Group will also grasp opportunities in overseas markets and embrace globalisation by increasing its brand’s influence and penetration there with its core capability for intelligent manufacturing. The Group will raise the standards of its management in order to reduce costs, raise efficiency, make steady progress and generate shareholder return for the long term.’’
About China Lesso Group Holdings Limited
China Lesso Group Holdings Limited is a leading large-scale industrial group that manufactures piping and building materials in China. After 37 years of rapid development, the Group has evolved into a leader in the industry of building materials and home improvement. It provides high-quality products and services such as plastic piping, building materials and home improvement, new energy, environmental protection, and operates a supply chain service platform.
Currently, the Group has established over 30 advanced production bases in 19 provinces of China and in foreign countries. The Group has established a nationwide sales network and has also developed long-term strategic partnerships with 2,853 independent and exclusive first-tier distributors that enable timely and efficient supply of comprehensive, quality products and professional services to customers. As an integrated manufacturer of a comprehensive range of piping and building materials, China Lesso provides over 10,000 types of quality products, which are widely applied to such fields as home improvement, civil architecture, municipal water supply, drainage, energy management, electric power transmission, telecommunication, gas supply, fire services, environmental protection, agriculture and marine aquaculture.
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