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Ugly year for Richina

Wednesday 13th August 2003

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Richina Pacific hasn't had a great six months, being hit by SARS, the strengthening of the New Zealand dollar, the economic consequences flowing from the Iraqi war and drought.

The company has reported an unaudited profit of $3.6 million for the six months to June 30. While this is higher than the downgraded forcast given nearly two months ago it is 15% down on last year.

Richina runs a leather manufacturing operation on Shanghai, the development and construction activities of Mainzeal and the Blue Zoo aquarium in Beijing.

It has reported an extraordinary loss of $763,000 resulting from the closure of the aquarium for six weeks as a consequence of the SARS virus. This closure reduced the net surplus attributable to shareholders by 15%.

The greatest impact on the earnings of the leather operation was caused by the lower than anticipated quality of New Zealand sourced lambskins, affected by adverse climatic conditions.

Other factors contributing to the operation's decline in earnings from $6.2 million to $4.7 million were the transition from toll manufacturing of upholstery leather to supplying customers direct, a slight softening in the demand for shoes leather and the strength of the NZ dollar against the US dollar.

Mainzeal's contribution to the first half earnings before interest and unallocated overheads was $5.7 million, up 61%. The margin on the sale of the Mobil complex and net earnings from the building during the six months contributed $5.0 million of the $5.7 million surplus.

Mainzeal's forward order book of work at period end was $223 million.

The sale of the Wellington office, shopping and car parking complex, Mobil-on-the-Park, and other operating activities saw a positive operating cash flow into the company during the period of $41.4 million ( at the same period last year the company had an operating cash outflow of $3 million ).

It resulted in a strong cash position at period end of $37.5 million ( compared to $14.1 million last year ) which will be used to grow the leather operation in China by financing forthcoming capital expenditure, to secure future loans being made by offshore banks and to fund the seasonal requirements for skins and pelts. It will also cover Mainzeal's retention obligations to suppliers.

Chairman Alastair MacCormick expects that the company's bottom line for the full year will not be less than $6.5 million.

During the period the company increased the number of shares on issue to 144.4 million through a one-for-one renounceable share issue which raised US$10.4 million.

At June 30 2003 the net asset backing per share was 56.8 cents compared to 57.6 cents 12 months' earlier after factoring in the dilution for the rights issue.

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