Asia Aluminum raised US$450 million (HK$3.51 billion) last December from selling seven-year high yield bonds, which pay an annual interest rate of 8 percent.

"The capex over the next two years is fully funded, and we will not need further financing," said vice chairman Benby Chan. The group had more than HK$4.5 billion in cash reserves at the end of June, when its net debt-to-equity ratio was 145 percent.

ADVERTISEMENT

Full-year earnings were hit by higher interest payments on the bond issue. Net profit in the year to June fell 25 percent to HK$166 million, as interest expenses rose almost threefold to HK$167 million.

Turnover was HK$3.41 billion, 16 percent up on a year earlier.

Chan said the group will not be paying any dividends in the next two fiscal years in order to meet its spending needs.

"When the group's aluminum extrusion capacity doubles to 300,000 tonnes a year by April next year, we will make up around 12 percent of the total capacity in the country," he said.

At present, the group has a 7 percent share of the mainland market, which is growing at more than 10 percent a year as investment pours into the sector.

The group's new 400,000 tonne a year facility to make rolled sheets will begin production in early 2007, Chan said.

Based on present rolled-sheet prices of US$2,500 per tonne, the group could be reaping an additional US$1 billion in annual revenues in the year ended June 2008, he said.

"In the China market alone, there's an annual shortage in aluminum rolled sheets of at least 500,000 tonnes," said director of strategic planning Benjamin Ng. Demand for construction projects of sports venues to be used in the Beijing 2008 Olympic Games means the shortfall could be particularly severe in 2007, he said.