Chongqing Machinery and Electric said yesterday that it will spend around 600 to 800 million yuan more in the second half to expand its core-business development in four segments, including commercial vehicle parts and components, power equipment, general machinery and computer numerical control (CNC) machine tools.

"We have already spent 200 million yuan more in the first half to expand our core business and explore new products," He Yong, president and executive director, said.

The company's H-share was first traded in Hong Kong on June 13, when it raised around HK$1.31 billion.

The company has already exchanged HK$100 million into yuan, while it will trade HK$500-600 million more by the end of this year.

According to Chongqing Machinery and Electric's prospectus, it will allocate 21.5 percent of the capital raised to the segment of commercial vehicle parts and components. While power equipment, general machinery and CNC machine tools would account for 17 percent, 15.2 percent and 12.8 percent of the capital respectively.

Around 25 percent, or HK$327 million, of the HK$1.31-billion capital will be used for acquisitions.

Chairman and executive director Sun Nengyi said the company will utilize the capital fund to gradually deploy more resources to increase productivity.

"We will grow through joint ventures and acquisitions, and to integrate operations to create synergies across business segments," Sun said.

When asked about the performance of the company's H-shares, He admitted that the fluctuation of Hang Seng Index took a toll on the stock price.

"We aren't satisfied with the current stock price. We hope it can reflect our company's capability in the future," He said.

The company's first-half net profits jumped 46 percent to 274 million yuan, while its gross profits soared 28 percent to 577 million yuan and gross profit margin increased from 17.9 percent to 18.3 percent.

He said the surge in raw materials prices has not made any big impact on the company's gross profit margin.

"The central government has not encouraged the steel export since July, which is why the steel price dropped by seven to 10 percent. The copper price also fell around 10 percent," he said, "that will help the company maintain the gross profit margin."

Gross profit margin of the commercial vehicle parts and components segment jumped from 32 percent to 36 percent, which was also the largest driving force to raise the overall gross profit margin.

"We believe the market need in vehicle sector is intensifying, therefore, our company will continue to enlarge our development in the segment," He said.

(HK Edition 09/12/2008 page2)