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COMMENTARY ON THE STATEMENT OF COMPREHENSIVE INCOME
The revenue contribution from each division is as follows:
* Restatement to reflect a prior financial year audit reclassification adjustment at Aluminium Alloy Stretched Plates Division for reclassification of scrap sales and respective cost of goods sold from operating income to non-operating income. This reclassification adjustment resulted in our 3Q2016 and 9M2016 revenue and cost of sales to reduce by RMB9.7 million respectively and other income to increase by RMB11,000. The reclassification has no effect on profit before income tax expense and profit for the period.
Our total revenue increased by approximately RMB47.4 million or 11.5% from RMB411.0 million in 3Q2016 to RMB458.5 million in 3Q2017. Revenue from our Aluminium Alloy Extruded Products Division increased by approximately RMB50.2 million or 16.9% from RMB297.0 million in 3Q2016 to RMB347.2 million in 3Q2017, mainly due to increase in export sales. Revenue from our Aluminium Alloy Stretched Plates Division was RMB111.2 million in 3Q2017 as compared with RMB113.3 million in 3Q2016. Our Aluminium Alloy Extruded Products Division contributed approximately 75.7% of total revenue in 3Q2017 as compared to approximately 72.3% for 3Q2016.
The table below shows the revenue segmentation by end usage at our Aluminium Alloy Extruded Products Division for the three months ended 30 September 2017.
Revenue contributions for the "Others" segment in the Aluminium Alloy Extruded Products Division comprised mainly the supply of aluminium alloy rods and other specialized profiles for industrial machinery.
The group's gross profit margin for 3Q2017 was 28.2% as compared to 24.6% in 3Q2016. This was due to higher gross profit margin at our Aluminium Alloy Extruded Products Division of 27.9% in 3Q2017 as compared to 24.8% in 3Q2016 due to a different product mix in the respective periods. Gross profit margin for our Aluminium Alloy Stretched Plates Division was 29.0% in 3Q2017 and 24.6% in 3Q2016.
Other income increased by approximately RMB1.3 million in 3Q2017, mainly due to higher unrealised foreign exchange gain as compare with 3Q2016.
Selling and distribution expenses increased by approximately RMB10.0 million in 3Q2017, driven mainly by higher transportation costs as compared with 3Q2016, as a results of higher business volume and increase in export.
Finance costs comprised interest for borrowings, bank charges and financing costs relating to discounted notes receivables. Finance costs increased in 3Q2017 mainly due to higher interest rates. Approximately RMB19.2 million (3Q2016: RMB35.8 million) of the interest on borrowings that are used to finance the construction of property, plant and equipment for our new production lines were capitalized.
The group's share of profit from its associated company, CRRC Nanjing Puzhen Rail Transport Co., Ltd, is approximately RMB7.4 million in 3Q2017 as compared to RMB12.4 million in 3Q2016. This was mainly due to decreased delivery to its customers during the period.
Income tax expense for 3Q2017 decreased by about RMB2.0 million, mainly due to an adjustment for under provision of income tax in 3Q2016 and lower withholding tax expense for the current period.
3Q2017 ended with profits of approximately RMB24.1 million which represented 6.6% increase over 3Q2016.
Commentary on the Statements of Financial Position
Trade and other receivables increased by about RMB195.3 million. This was mainly due to increase in trade receivables of about RMB59.9 million due to increase in business volume. Other receivables increased by about RMB135.4 million mainly due to advance payments made to our suppliers for inventories.
Restricted bank deposits decreased by about RMB57.4 million due mainly to the settlement of banker's acceptances in respect of the purchase of raw materials.
Trade and other payables increased by about RMB112.2 million mainly due to increase in business volume and advance received from our customers.
Net borrowings after currency translation adjustments decreased by RMB188.2 million mainly due to repayments.
Commentary on the Consolidated Statement of Cash Flows
During the quarter under review, interest paid and capitalised amounted to RMB19.2 million and net decrease in borrowings was approximately RMB22.6 million. The above outflows were offset by net cash from operating activities of approximately RMB35.5 million which resulted in cash and cash equivalents balance of RMB944.0 million as at 30 September 2017.
Following the 19th National Congress of the Communist Party of China, the Ministry of Transport of the PRC reiterated its commitment in ensuring that the country has a well-developed transportation system. The total length of China's high-speed rail is estimated to reach 38,000 km by 2025, and 45,000 km by 2030. Further to that, experts estimate that by 2020, 50 cities in China will have metro lines totalling 6,000 kilometres, with total investments expected to exceed RMB 4 trillion.
On the international front, the PRC government's "Belt and Road" Initiative continues to make inroads into other markets outside of the PRC, with the government's active pursuit of international rail projects. Industry players stand to benefit from the export of China's railway expertise to international markets.