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* Extracted from Annual Report 2016

CEO

Dear Shareholders,

Midas delivered strong bottomline growth in FY2016 as profit for the year increased 76.3% to RMB100.8 million, supported mainly by the consolidation of results of our Aluminium Alloy Stretched Plates Division from 27 July 2016 to 31 December 2016. This is a strong testament to the Group's diversification strategy into new businesses and industries.

Our Aluminium Alloy Extruded Products Division continued to secure new contracts throughout the year to strengthen our order book, backed by our strong track record as the market leading supplier of aluminium alloy extruded products. Meanwhile, our associated company, NPRT, delivered higher contributions in FY2016, led by increased delivery to its customers during the year.

FY2016 FINANCIAL REVIEW

Revenue declined marginally by 1.8% to RMB1,485.7 million during the year under review, compared to RMB1,512.2 million a year ago, attributable to lower revenue from the Aluminium Alloy Extruded Products Division.

On a segmental basis, revenue from the Group's core Aluminium Alloy Extruded Products Division decreased by 13.8% to RMB1,293.3 million (FY2015: RMB1,500.6 million), accounting for 87.1% of total revenue in FY2016 as compared to about 99.2% for FY2015. The decrease was partially offset by revenue of RMB182.0 million from the Group's Aluminium Alloy Stretched Plates Division for the period from 27 July 2016 to 31 December 2016. This newly-acquired business contributed 12.2% of total revenue for the year.

Within the Aluminium Alloy Extruded Products Division, the Transport Industry was the largest revenue contributor, accounting for 65.1% of the division's revenue in FY2016 compared to 81.2% in FY2015. The Power Industry and others segment accounted for the remaining 12.7% and 22.2% of the division's revenue respectively. The others segment comprised mainly the supply of aluminium alloy rods and other specialized profiles for various other industries

Cost of sales declined 5.5% to RMB1,044.6 million in FY2016, from RMB1,105.4 million in the preceding period.

Consequently, the Group's overall gross profit margin increased from 26.9% in FY2015 to 29.7% in FY2016, due to a higher gross profit margin of 30.4% achieved at the Group's Aluminium Alloy Extruded Products Division, compared to 27.0% in FY2015.

The Group posted a 72.2% rise in other income from RMB23.8 million in FY2015 to RMB40.9 million in FY2016. Other income comprises mainly interest income and income derived from the disposal of scrap materials and subsidies received at the Group's Aluminium Alloy Stretched Plates Division.

Selling and distribution expenses increased marginally by 3.8% from RMB73.4 million in FY2015 to RMB76.2 million in FY2016. Administrative expenses increased 7.6% from RMB172.6 million in FY2015 to RMB185.8 million in FY2016.

Finance cost declined 14.3% to RMB119.1 million in FY2016 mainly due to lower interest rates of bank borrowings. Approximately RMB129.3 million (FY2015: RMB124.7 million) of the interest on borrowings used to finance the construction of property, plant and equipment for the new production lines were capitalised.

Share of contributions from the Group's associated company, NPRT, rose to RMB35.0 million in FY2016 from RMB31.7 million in FY2015, mainly due to increased delivery of train cars to its customers during the year.

Income tax expenses increased by about RMB15.1 million to RMB35.1 million in FY2016, due mainly to higher profits compared to FY2015.

As a result, the Group ended the year with profits of approximately RMB100.8 million which represented 76.3% increase over FY2015.

ORDER BOOK

The Group continued to win new contracts during the year and made progress in our ongoing efforts to diversify beyond the PRC railway sector. We are encouraged that customers continue to recognise and place their trust in Midas' ability as a preferred supplier. During the year, our Aluminium Alloy Extruded Products Division's order book was boosted by RMB533.6 million worth of new contracts from both PRC and international customers.

Our new orders from the PRC high-speed rail market included contracts from CRV and CRRC Tangshan Co., Ltd. worth a total of RMB251.9 million. The supply contract from CRV was for the supply of aluminium alloy extruded profiles and fabricated parts for two types of highspeed trains that will operate at speeds of up to 250km/h and 350km/h while the contract from CRRC Tangshan Co., Ltd. involves the supply of aluminium alloy extruded profiles and fabricated parts for the CRH380B high-speed trains.

We also secured four supply contracts for the PRC metro train market worth a total of RMB129.4 million, which comprised orders for the following metro train projects:

  • – Shanghai Metro Line 17;
  • – Haerbin Metro Line 1;
  • – Wuhan Metro Line 7;
  • – Chongqing Rail Transit Loop Line.

In addition to the contracts listed above, the Group also secured three international contracts, which included a €2.0 million (equivalent to approximately RMB14.6 million) project in the Middle East and two projects in Europe worth €9.8 million (equivalent to approximately RMB71.7 million) and RMB66.0 million respectively. These project wins underscore our competitiveness as a quality international supplier of aluminium alloy extruded products.

As such, the Group kicked off 2017 with an order book of approximately RMB900 million as at 31 December 2016.

BROADENING OUR SERVICE AND PRODUCT OFFERINGS

With the PRC government's commitment to develop and expand PRC's rail network as well as the “One Belt One Road” initiative, the Group is positive of the significant market opportunities for the rail sector in the PRC and overseas. Our established track record gives us a strong competitive advantage to benefit from this significant boost to the railway sector to replenish and grow our order book.

As part of the Group's diversification strategy, we are in the midst of broadening our service and product offerings relating to aluminium products. Besides harnessing synergies along the value chain for our offerings catering to the railway industry, our expanded service and product offerings will also enable us to expand our customer base to enter new industries and sectors.

As we expand our operations, we are also mindful of rising overhead costs in the PRC, and will seek to create synergies in our operations and practice prudent cost management to support our margins and ensure the sustainable long-term growth of our businesses.

Going forward, we will endeavour to continue to grow our various business segments and maintain the Group's edge as a leading supplier of aluminium alloy products amidst a competitive market.

ACKNOWLEDGEMENTS

As we close the financial year, we would like to extend our appreciation to all our shareholders, staff, business partners and associates for your unwavering support and belief. We look forward to your continued support as we embark on this journey to take Midas to its next level of growth.

Chew Hwa Kwang, Patrick
Chief Executive Officer