(Hong Kong, 16 December 2004) Shui On Construction And Materials Limited ("SOCAM", stock code: 983) today announced that for the six months ended 30 September 2004, turnover was HK$1.1 billion, a decrease of 19% compared with the same period last year (2003: HK$ 1.3 billion). Profit attributable to shareholders increased substantially to HK$392 million (2003: HK$14 million), representing basic earnings per share of HK$1.46 (2003: HK$0.05). The Directors recommended the payment of an interim dividend of HK$0.3 per share.

According to SOCAM Chairman Mr Vincent H.S. Lo, the considerable profit growth was mainly attributable to the capital gain from the injection of the Group's Rui Hong Xin Cheng (Rainbow City) interests into Shui On Land Limited (SOL) and the substantial gains generated by the two Yangtze Ventures venture capital funds. Strong profits from the SOL investment and the venture capital funds are expected to continue. Although performance of the cement businesses in Chongqing and Guizhou has been temporarily affected by the Central Government's austerity measures, long term prospects remain good.

After receiving unanimous approval from independent shareholders in April 2004, SOCAM injected its Rainbow City development into SOL, which was formally established in June 2004 by the private arm of Shui On Group (SOCAM's privately held parent company) and now owns development rights of more than 6.6 million square metres of gross floor area in central districts in major Mainland cities. The injection generated a capital gain of HK$274 million, which was recognized in the interim profit and loss account. "More importantly, SOL will provide SOCAM with steady and strong development profits and rental income stream in the years to come as the property markets in major Mainland cities continue to grow," said Mr Lo.

The portfolio of investments in the two Yangtze Ventures venture capital funds in which SOCAM holds majority interests produced substantial positive results for the Group during the six-month period. These included a profit of HK$178 million from the sale of approximately two-thirds of the shareholding in Solomon Systech and the revaluation of the remaining stake; a profit of HK$29 million from the disposal of the Zhapu port project majority owned by China Infrastructure Group, in which the Yangtze Ventures hold a 33.78% shareholding; and a write-up of HK$22 million from other investments.

Long term prospects for cement business remain strong despite temporary drop in profitability

The Group's cement operations in Chongqing and Guizhou have been adversely affected by the austerity measures imposed by the Central Government. With stringent control on major infrastructure works and investments in property projects, which reduced demand considerably, on the one hand and soaring costs of coal, electricity and transportation on the other, contributions in both areas fell during the six-month period.

However, this effect should be temporary and SOCAM's commitment to expanding cement investment in southwest China remains firm. Mr Lo said, "We are confident that the Central Government's long term Go West policy will ensure continued development and thus robust demand for high grade cement in the region. In particular, given the severe power shortage nation-wide, the development of the abundant hydroelectric and coal resources in inland provinces is among the top priorities of the government. We are further penetrating the market in preparation of the upturn."

In addition to further acquisitions and new plant construction in Chongqing and Guizhou, a sales and purchase agreement was signed with the Yunnan government in August to acquire 80% of several cement companies in Kunming, the provincial capital, and Kaiyuan. The companies will have a combined production capacity of 4.5 million tonnes per annum when a new dry kiln currently under construction in Kunming is completed. The Central Government's policy to foster much closer ties with Asean countries, three of which directly adjoin Yunnan, is expected to significantly boost the economy of the province. Substantial infrastructure is now being built to facilitate traffic with these countries, and the construction boom is expected to benefit the cement industry.

In Hong Kong, turnover of SOCAM's construction division amounted to only around HK$833 million for the half year. However, with efficient contract administration and a reduced cost structure, contributions from projects completed during the period were better than expected. "Although margins on tenders submitted by some competitors are still unrealistically low in our opinion, the increased amount of works available from the government for tender indicate a slow recovery in the medium term," Mr Lo commented.

At 30 November 2004, the gross and outstanding value of contracts on hand amounted to approximately HK$4.5 billion and HK$2.5 billion respectively (30 November 2003: HK$5.4 billion and HK$3.2 billion respectively).

Market conditions for the Group's construction materials businesses in Hong Kong remain extremely tough and substantial losses were again sustained in the six-month period.

SOCAM has decided to terminate most construction materials operations in the Pearl River Delta as well as its materials trading business under Asia Materials.

About SOCAM

SOCAM, a member of the Shui On Group, was listed on the Hong Kong Stock Exchange in 1997 and is engaged in construction and construction materials in Hong Kong and the Chinese Mainland. The company also has an interest of more than 20% in Shui On Land Limited.