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2013.02.27 DCH 2012 Annual Results Announcement
Dah Chong Hong Holdings Limited

   Dah Chong Hong Announces 2012 Annual Results as

Motor Dealership Business Continues to Grow

& Total Food Supply Chain is Further Strengthened

(Hong Kong, 27 February 2013) Dah Chong Hong Holdings Limited ("DCH" or the "Group"; stock code: 01828) announced today its annual results for the year ended 31 December 2012.

In 2012, the Group continued to grow its business with turnover rising 4.1% to HK$48,014 million (2011: HK$46,109 million) despite an unstable global economic environment and the moderated market conditions in the PRC. However, profit from operations dropped by 5.0% to HK$1,775 million (2011: HK$1,869 million) as the supply and demand disparities due to the over production of cars in mainland China led to profit margin erosion. Profit attributable to shareholders decreased by 21.0% to HK$1,045 million (2011: HK$1,323 million) resulting from a lower net gain on remeasurement of investment properties and higher finance costs.

The Board of Directors of DCH has proposed the payment of a final dividend of 8.88 HK cents per share (2011: 12.74 HK cents per share), along with the interim dividend of 11.78 HK cents per share (2011: 14.30 HK cents per share) already paid, bringing the full year dividend to 20.66 HK cents (2011: 27.04 HK cents per share).

Mr. Clement Hui, Chairman of DCH, said,"The unstable global economy and the low profit margin on new car sales in the PRC caused by the supply and demand disparities have impacted the performance of the Group. With a balanced and diversified business strategy, DCH managed to grow its business though it recorded a drop on the profit. With a strong financial position, DCH is well-placed to meet any development opportunities to enhance the shareholders' value."

Business Review & Prospects

Motor and Motor Related Business

Segment turnover of the Motor Business in 2012 increased by 3.8% to HK$38,613 million (2011: HK$37,183 million) whereas segment result from operations dropped by 22.7% to HK$1,292 million (2011: HK$1,672 million). Amid the weakened consumer demand, the China auto market eased to a low single digit growth for the second year. Furthermore, the tense Sino-Japan political relationship dampened the sales of Japanese vehicles in mainland China in 2012.

Mainland China

-Approximately 81,000 units of new car sold, including around 69,000 units of passenger car and around 12,000 units of commercial vehicle

-Four new 4S shops, mainly for luxury brands including Ferrari, Maserati, Bentley, were opened, bringing total to 69 in 2012

-Dealership sales volume dropped by 4.4%, while dealership after-sales was up by 10.1% in unit serviced and by 28.4% in revenue, a steady increase in this recurring income with good margins will continue to enhance the profitability of the business

-A solid same-store sales growth of 21.1% in after-sales service was recorded

-A total of 21 4S greenfield projects are in the pipe line

-DCH will continue to grow the dealership business through greenfield and merger and acquisition of mid-to-high-end brands

-The pilot plan to develop independent service outlet chain in Guangdong province will continue in 2013, with a target of expanding to seven outlets

Hong Kong, Macao & Other Markets

-Around 10,800 units of new car sold in Hong Kong and Macao

-In Hong Kong, market share stood at 19.4%, with more than half of the truck and bus sales attributed to DCH

-Expected weakening of the Japanese Yen will further benefit the motor business in Hong Kong

-DCH expanded its commercial vehicle brand portfolio in 2012by adding SINOTRUK, a major truck manufacturer in the PRC, and will represent DAF, a renowned European brand in 2013

-Audi unit sales grew by 9.4% in Taiwan. After-sales service is expected to generate greater profit in 2013 through the recently established "body and paint" shop of Audi in Taiwan

Food and Consumer Products Business

Segment turnover grew by 5.6% to HK$8,918 million (2011: HK$8,443 million). In addition, revenue of HK$2,263 million from frozen pork and poultry distribution business was booked separately under our new joint venture with Brasil Foods S.A. Segment result from operations increased by 26.1% to HK$280 million (2011: HK$222 million) mainly attributable to the strong demand for premium Fast Moving Consumer Goods ("FMCG") food products and trendy consumer products and a higher contribution from food processing business.

Mainland China

-Segment turnover grew by 4.9% to HK$3,654 million (2011: HK$3,483 million), while segment result from operations increased by 6.4% to HK$117 million (2011: HK$110 million)

-Food distribution network has expanded to 102 cities across mainland China

-Product portfolio is further diversified with 190 brands covering 2,000 products sourced from 36 countries

-Turnover of FMCG business rose 8.3% with a strong demand for internationally branded and sourced FMCG which benefited from consumer's food safety concerns in mainland China, especially beverage and dairy products recorded a strong turnover growth of 59.5% and 42.9% respectively

-DCH is pursuing greater opportunities in the dairy products, including milk powder, liquid milk, cheese and associated products

-A total of 47 DCH AV Shops and DCH Digi Shops in key cities were set up, and targets to build a network of 100 shops in 2013

Hong Kong and Macao

-Segment turnover rose 9.6% to HK$4,449 million (2011: HK$4,061 million). Segment result from operations surged by 27.5% to HK$213 million (2011: HK$167 million), with segment margins improved by 0.7 percentage point to 4.8%

-FMCG business turnover rose 9.9%, with beverage and dairy products achieved stable growth

-Food processing business registered robust sales growth of 46.2% as the two food processing plants has demonstrated progressive growth which will strengthen DCH's position in the processed meat industry

-The number of retail food outlets increased to 85 and the Group targets to reach 92 shops in 2013

-A new house brand Cheer dairy and nut product lines were launched in Hong Kong

Logistics Business

-Segment turnover surged by 19.7% to HK$541 million (2011: HK$452 million) and the segment result from operations increased by 16.7% year-on-year to HK$21 million, driven by business in Xinhui Logistics Centre and Hong Kong segment

-New logistics facilities in Shanghai commenced operation and the temperature controlled repacking service for a major confectionery supplier was extended to Shanghai following the successful collaboration in Xinhui. In order to streamline the rapid development of the food processing business, the Group plans to expand the cold storage capacity at the Yuen Long Logistics Centre in 2013

Mr Hui concluded, "Looking ahead, we expect our business to benefit from the revived growth in the PRC economy in the coming years. Enjoying a strong cash flow generated from operations, we are ready to seize merger and acquisition opportunities to accelerate the development pace of the motor business. We plan to improve after-sales service to enhance revenue growth and profitability, and continue to dedicate efforts in growing our motor related business in the Greater China. Meanwhile, the development of our food business is on a fast expansion track which is in line with our strategy of maintaining a balanced portfolio of businesses. We will accelerate the development of this sector with the support of our modern logistics to maximise the profitability and growth potential at each level through the Total Food Supply Chain. We will enhance the Group's competitive strength through expanding our regional capability formore direct penetration to customers; enhanced operational efficiency by regional management; broadened sales channels to increase business; and higher effectiveness in securing the agency of new products."

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