(Hong Kong, 27 November 2001) Shui On Construction and Materials Limited ("SOCAM", stock code: 983) today announced its financial results for the six-month period ended 30 September 2001. The Group's new strategic businesses, including quality housing development in the Chinese Mainland and cement operations in Chongqing and Guizhou, continue to make good progress and are expected to start contributing significantly to the bottom line in two to three years. However, an abrupt decline in the local construction and construction materials markets has, as SOCAM had anticipated, resulted in a short-term, substantial drop in the Group's profit. Over the six-month period ended 30 September 2001, turnover was HK$2,002 million, down 17%. Profit attributable to shareholders was HK$72 million, down 72% from the corresponding period last year while earnings per share were HK$0.27, down 72%. The Directors of the Company recommended the payment of an interim dividend of HK$0.15 per share.

"The decline in the public housing sector and the construction industry in general has been faster and more severe than expected. The recent announcement to suspend the sale of Home Ownership Scheme (HOS) flats for ten months and to cap annual sales of HOS units at 9,000 units thereafter till end of March 2006 has immediately and substantially reduced works opportunities for Shui On," said Mr Vincent H S Lo, Chairman of SOCAM.

In the past year, the Hong Kong Housing Authority (HKHA) has been offering much fewer tendering opportunities. The property market has remained sluggish, causing demand and margin for construction materials to continue to fall. As the number of private sector projects has also declined, more construction companies are bidding for government projects, further dragging down the profit margin, with some of them bidding below cost at times.

Mr Lo added, "With such a weak local market, we anticipate that the Group's financial results in the current year and next year may still be disappointing despite the good progress of our long-term strategic development plan. However, we are going full speed ahead with our new strategic growth businesses in the Chinese Mainland, which should start to contribute significantly to our profits within two to three years. And despite the unfavourable market conditions in Hong Kong, we'll continue to maintain our leadership through the continual employment of innovative construction techniques and vigorous cost control."

To achieve long-term growth and profitability, Mr Lo reiterated that SOCAM would focus on five strategic development areas: quality housing development in major cities in the Chinese Mainland; cement production in the Mainland's central and western provinces; building construction and construction materials supplies in Hong Kong and the Pearl River Delta; global online trading for construction and home improvement materials; and planning, developing and promoting major development projects in the Mainland.

The second phase of Rui Hong Xin Cheng, the large-scale quality residential development in Shanghai recently taken over by SOCAM and located close to a new Metro station, comprises a 30,000-square-meter commercial complex and residential blocks with a gross floor area of approximately 200,000 square metres. Part of this phase is scheduled to be completed by end of 2003 while sales are expected to start in the first quarter of 2003.

"The success of the APEC meeting in Shanghai in October has highlighted the rising importance of this city in the international economic scene. With China's accession to the World Trade Organization, the steadily improving economy and the abolition of welfare housing, we believe the property market in Shanghai will continue to develop and grow, especially in the middle- to high-end segment. We expect Rui Hong Xin Cheng, already an established name for quality housing in Shanghai, to start contributing significantly to our profit within three years," said Mr Lo. Residential property prices in Shanghai have increased 6.8% in the first eight months this year and are expected to rise by 5 to 10% next year.

SOCAM's cement investments in Chongqing and Guizhou have made it one of the top high-grade cement manufacturers in China. Its Chongqing TH Cement joint venture is already the largest high-grade cement producer in Chongqing with an annual capacity of 2.8 million tonnes and a share of more than 70 percent of the local high-grade cement market. In Guizhou, four operations have been acquired in Honghuagang, Xishui (both in Zunyi), Kaili in Qiandongnan and Xingyi in Qianxinan while three new rotary kilns are being built. The combined annual capacity will reach 1.9 million tonnes when the planned new kilns are completed by the next financial year.

"We're very confident of the high grade cement market in the central and western provinces as demand will continue to be boosted by numerous major infrastructure and housing projects. We will continue to purchase and modernize cement plants in strategic locations in both Chongqing and Guizhou province and will also identify profit-generating opportunities in other markets in the region. Although profit contributions of the cement business are still small at the moment, it is one of our fastest-growing businesses and also allows us to establish a strong foothold in China's resource-rich hinterland," said Mr Lo.

The gross and outstanding values of construction contracts on hand were HK$8.1 billion and HK$4.5 billion respectively. Despite keen competition in the construction industry, SOCAM&'s recently submitted tenders are the lowest for three government projects with a total contract value close to HK$1.3 billion.

"Even though there are fewer tendering opportunities offered by the HKHA, with our leadership in the industry we are confident that we'll continue to win contracts from HKHA and other government bodies and major institutions. We will also benefit from the government's policy to increase infrastructure projects," added Mr Lo.

While it is likely that concrete consumption in Hong Kong in 2001 will further decline to around 7 million cubic metres, the lowest level in the last 10 years, the order books of SOCAM's concrete and quarrying operations are at reasonable levels and should provide for a stable production for the remainder of the financial year.

AsiaMaterials, SOCAM's global trading house for building and home improvement materials, is developing more new product lines bearing its own brand names in addition to its "Sierra Green™” environmentally friendly lighting products. It has also become the sole distributor/agent of "Sanibano" sanitary wares from Spanish-based Expokro S.L, "Tivapan" wood products from Belgium and outdoor furniture from Barcelona-based Kettal S.A.

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.