Zoomlion Profits Near Four Billion Yuan Improving Operational Quality in Challenging Times

On the evening of March 28th, Zoomlion announced its annual performance through December 31, 2013. The company's international and domestic financial reports have already been audited by KPMG and Baker Tilly (China), and standard audit reports have been issued without reservation.

In accordance with China's accepted accounting principles, Zoomlion's operating revenue for 2013 came to about RMB 38.542 billion, achieving a net profit of around RMB 3.839 billion for shareholders of the parent company, with earnings per share of RMB 0.50, and a net cash flow from operating activities of RMB 737 million. The board chairman recommends that each shareholder receive a cash dividend of RMB 1.50 (including tax) per ten shares, based on the total number of 7,705,954,050 shares.

The company believes that given the slow growth of the Chinese construction machinery industry and sluggish demand throughout the market, this was the most challenging and difficult year since Zoomlion's inception. In the face of a grim external environment, the company made timely adjustments to its operational strategy and development methods while adhering to its operating ideal of "Growing with Quality." The company vigorously advanced simulated changes to its shareholding system, stringently controlled operational risks, effectively achieved lower costs and higher efficiency, enhanced proprietary innovation and product research and development, and consolidated operating quality. At the same time, the company took proactive measures to clarify relevant earnings and other inaccurate reports, effectively protecting the interests of shareholders and the company's brand image.

Gradually Stabilizing Operational Performance While Maintaining Stable Market Share

During the period covered by the report, the company saw declines in revenue and net income in its main business operations. A gradual contraction of the decline indicated that its operations were beginning to stabilize. In an analysis based on data from the third-quarter of publicly listed companies and general industry trends, this performance was still the best in the industry. In 2013, the company's market share for its chief products continued to hold steady. The company led the industry in domestic market share for concrete machinery, truck-mounted pumps, boom pump trucks, mixing trucks, and batching plants. The company also led the industry in domestic and global market share for hoisting machinery and tower cranes. Market share for truck cranes also held steady, and environmental sanitation machinery and street cleaners and sweepers also maintained their position at the top of the industry.

Stringently Controlling Operating Risks and Continuing to Improve Operating Quality

During the period covered by the report, the company strengthened the risk and budget controls for its sales operations. At the same time, the company strengthened its inventory target management and processing controls, and successfully controlled operating risks, while achieving improvements in operational quality. As of the end of 2013, the company's total inventory had fallen dramatically, with a reduction of RMB 3 billion from the end of 2012, representing a year-on-year decline in excess of 25%. In 2013 the company's average contract down payment ratio increased dramatically, while contract periods began to shrink and reimbursement capability improved noticeably.

Enhancing Proprietary Innovation and Leading the Industry in Technological Improvements

With its goal of strengthening technological core competitiveness, and its methods of technical innovation and technological management, the company effectively strengthened its research and development system. During the period of the report, the company successfully completed 144 major research and development projects and filed 1,699 patent applications, making progress toward establishing the company as a technological pioneer. One of its projects, the "Extra-large Tower Crane Key Technology and Application" won a second-place National Scientific and Technological Progress Award. At the same time, on the basis of extant national key laboratories for construction machinery technology, national concrete machinery and engineering technology research centers, nationally certified enterprise technology centers, urban public equipment and technology research institutes, and national postdoctoral technological research work stations, the company was approved to construct a National-Local United Engineering Research Center of Mobile Crane Technologies. Thus, having become the industry leader and the industry's only "six-in-one" technological innovation platform, Zoomlion continues to promote technological reforms and progress in the industry.

Proactively Integrating International Resources and Continuing to Write New Chapters in Overseas Business

During the period of the report, the company formally began production operations at its overseas bases in Brazil and India, and expanded its financial cooperation with Germany, Thailand, and the United Arab Emirates. With the help of the JOST high-end technical platform, the company completed its expansion in the Singaporean and German markets, while achieving complete ownership of the Italian company CIFA. To position itself as a global pioneer in the area of dry-mixed mortar equipment, the company also signed an equity purchase agreement to acquire the renowned global brand M-TEC.

Setting the Record Straight to Protect Rights and Privileges and Effectively Improving Brand Image

During the period of the report, the company was the target of organized, large-scale attacks in the area of public opinion, which caused substantial damage to the company's reputation. The company took many measures, including the use of legal methods, to protect the rights and interests of its shareholders. The company achieved its goals of defending the legal rights and interests of its shareholders while protecting the credibility and brand image of the company, and obtained positive results in instituting thorough reforms.

Looking to the future, Chairman Zhan Chunxin commented that China's economy is in transition, and the global economy is moving toward environmentally friendly growth. The construction machinery industry is also moving into an era in which efficiency and quality will be vital. In the face of adverse market conditions, only leading companies in the areas of technology, branding, management, and capital will survive. Enterprises with the ability to develop sustainably will have the last laugh. The company will promote reforms, establish an operating system in which responsibility and power are closely correlated, and bring its management model, organizational structure, and operational flow completely in line with the market. The company will also continue to internationalize and to accelerate product rollouts and corporate financial investment to promote the growth of its overseas business operations. Through innovation and structural adjustment, the company will improve the quality and stabilize the growth of its construction machinery business, for this is the basis and foundation of Zoomlion's strategic transformation. The company will make use of its existing advantages in its five main areas, while opening up new areas of the industry and achieving new gains.