Full Year Financial Statement the Period Ended 31 December 2006
 Profit & Loss Review Commentary Balance Sheets
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FY2006 versus FY2005
Compared to FY2005, Group turnover increased by 3.5% or RMB32.1 million from RMB909.1 million to RMB941.2 million. This was due mainly to higher sales of PET bottles driven by increased production capacity from the Group's new plants in Shenzhen, Jiedong and Zhanjiang.
The Group's gross profit margin was, however, eroded by the significant increase in raw material prices in the financial year. The Group also incurred higher depreciation and amortisation charges on account of an increase in the Group's property, plant and equipment. Therefore, the Group's gross profit decreased by 7.5% or RMB18.6 million from RMB249.0 million to RMB230.4 million.
In line with the decrease in gross profit, profit before tax decreased by 8.9% or RMB16.2 million from RMB183.3 million to RMB167.1 million.
As a result of lower income tax, net profit attributable to shareholders decreased by 5.0% or RMB7.3 million from RMB144.1 million to RMB136.8 million.
To meet the expected growth in demand for the Group's PET bottles, the Group had increased its production capabilities to support expansion of its market share of PET bottles in the People's Republic of China ("PRC").
In February 2006, an additional PET bottle production line within the Group's existing PET bottle production plant in Tianjin commenced operation. This new line has an annual production capacity of 300 million cold or hot-filled PET bottles and has increased the Group's annual production capacity by approximately 22% from 1,331 million to 1,631 million cold or hot-filled PET bottles.
The Group's new PET bottle production facilities in Shenzhen, Jiedong, Zhanjiang and Tianjin are running at almost 50% capacity. This will increase progressively with the market expansion of the Group's major customers in these regions.
The Group's new PET chips production plant, Pan Asia PET Resin (Guangzhou) Co. Ltd ("PET Plant"), is currently under construction and is expected to be completed in 2Q2007. The PET Plant is expected to have a production capacity of 200,000 metric tonnes per annum. The Group's current consumption of PET chips is about one third of the projected production of the PET Plant in the first year. The Group believes it will be the biggest bottle grade PET chips production plant in the southern part of the PRC.
The PET Plant is part of the Group's strategy to further vertically integrate its operations and expand into the manufacture and sale of bottle grade PET chips. The production of bottle grade PET chips would serve as a sound foundation for the Company's future growth. With the PET Plant, the Group would be able to better manage the costs of raw materials thereby enhancing its competitive position.
Gross profit margins however, remain vulnerable to petroleum-based raw material prices as a result of volatile crude oil prices.
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