Mainland China
Entering into the second half of the year under review, the Mainland China economy began to show obvious signs of recovery. Rising demand from public sector infrastructure development had led to growth in cement consumption. This was followed by accelerated purchase from a reviving property market. In the more affluent Southern China, the rebound was significant, particularly in the last quarter of the year. The Guangdong province, which is basically dominated by a few key players, with the Group as a market leader, experienced an improvement in market sentiment quarter by quarter.

Yingde
The Yingde plant's four production lines were all in operation for the first full year and had been running at close to optimum utilisation. A total of approximately 8.4 million metric tonnes of output were sold during the year. This was close to the plant's overall rated annual capacity of 9 million metric tonnes.

The continued improvement in the economic environment in Southern China had fuelled the demand for cement since the second quarter of the year under review. The rapid urbanisation in the Guangdong province and the transformation of the peripheral counties of major southern cities had brought about massive construction projects.

The Yingde plant managed to maximise the benefit of economies of scale with optimum utilisation of its enlarged capacity. Furthermore, lower coal prices and the inauguration of two residual heat power generation units during the year served to further reduce the plant's energy costs and contributed to its encouraging profitability.

Gui Gang
The Group completed the acquisition of TCC (Gui Gang) in the Guangxi Autonomous Region at the end of September 2009. This major transaction resulted in a further consolidation of the Group's leading position in the Southern China region, and brought its overall annual capacity of cement, clinker and slag powder up to 26 million metric tonnes. Through the operations of TCC (Gui Gang), the Group has extended its market reach to a large part of the Guangxi Autonomous Region, Western Guangdong and the Hainan province.

Since the transaction was completed at the end of the third quarter of 2009, three months of the TCC (Gui Gang) results were booked to the Group's 2009 accounts, resulting in a healthy profit contribution.

TCC (Gui Gang)'s four production lines have a rated annual capacity of 9 million metric tonnes. During the last three months of the year, a total of 2.1 million metric tonnes of cement and clinker were sold, with a significant portion distributed to the Guangdong province through Xijiang.

During the year under review, the low water table of Xijiang had hindered material movement along the river and significantly raised the transportation costs of TCC (Gui Gang). Barring this factor, the Gui Gang plant could have achieved even better results for the year.

Fuzhou
During the year, the Fuzhou plant sold a total of 1.41 million metric tonnes of cement, representing a 17 per cent increase from that of 2008. However, the plant suffered from a lower ASP due to a sluggish property market in Fujian province.

The plant's third grinding facility had yet to achieve its optimum utilisation and had thus affected the plant's overall efficiency. The Fuzhou plant's gross margins were further trimmed by its reliance on clinker supply from third parties. As a result, the plant reported a loss for the year.

Jurong
The Jurong plant had redirected its sales focus to the domestic market, with the majority of its sales volume of approximately 2.4 million metric tonnes sold in Eastern China.

The plant's product ASP and sales volume had been pressurised by the highly competitive market environment in Eastern China. Under-utilisation of the plant's capacity had hampered its overall cost-efficiency. In addition, the Group’s standardisation of all of its facilities' depreciation period had led to higher depreciation charges for Jurong plant, due to a shortened period of depreciation. As there had not been any significant improvement in the ASP in the second half of the year, the Jurong plant posted a loss for the full year.

AKB
The sales volume of Anhui King Bridge Cement Company Limited ("AKB") during the year amounted to 550,000 metric tonnes of slag powder, which was almost the same as that of the previous year. However, the plant’s gross profit margins were narrowed by higher raw material costs.

The plant intensified its cost control measures and strengthened its sales to the local market. These efforts enabled the plant to maintain a modest profit during the year.

Liuzhou
The Group's 60 per cent-owned slag powder joint venture in Liuzhou reported a sales volume of 990,000 metric tonnes of slag powder, which was more or less the same as that of 2008.

The Liuzhou joint venture experienced a retreat in profit for 2009. During the first half of the year, sales volume of the venture was affected by a weak economy. When demand recovered in the second half of the year, the low water table of Xijiang had hindered its outbound logistics and elevated its transportation costs.

Given the strong demand for slag powder, particularly during the fourth quarter of the year, the joint venture could have enlarged its earnings, should there not be an impact of the freight charges.

Hong Kong
The Group's cement and concrete business in Hong Kong performed favourably during the year. The Hong Kong operation enjoyed a higher gross profit due to lower cost of sales, and reported an improved net profit during the year.

Other significant investments held
A net increase in fair value of HK$17.5 million was recognized for held-for-trading investments upon stating them at market prices as at 31 December 2009.