In 2010, the overall economic performance of Vietnam was seen improving, with its GDP growth rate achieving 6.8%. Yet, its attractiveness to foreign investment capital was far less satisfactory than past years and some other South East Asian countries. Vietnam recorded an inflow of US$18.6 billion Foreign Direct Investment for the year of 2010, representing a drop of 20% on a year-on-year basis. On the other hand, the surging inflationary pressure posed a serious threat to the recovering economy. The inflation rate reached 11.8% for December of 2010 and was on a rising trend. Banks’ deposit rate and lending rate reached the records highs, and resulted in severely impact on the economic activities, especially infrastructure and construction related projects. Moreover, the trade deficit of Vietnam climbed to US$12.4 billion in 2010, causing dramatic drop of foreign exchange reserve and thus leading to the government’s decisions in devaluating the Vietnamese Dong (“VND”) for about 5.5% in 2010. Whereas, the VND has been further devaluated at the beginning of 2011 and up to date, the exchange rate in terms of USD has gone further down 9.3%, according to the exchange rate of the State Bank of Vietnam.

For the year ended 31 December 2010, the Group recorded a turnover of HK$838,441,000, representing an increase of 16.2% as compared to HK$721,833,000 of last year. The Group’s major turnover was contributed by cement business and property investment business. Turnover from the cement business was HK$702,428,000 representing a year-on-year increase of 23.9%, whereas turnover from the property investment was HK$126,510,000, representing a decrease of 13.3% as compared to 2009.

The consolidated net profit attributable to shareholders was HK$45,377,000 for the year, representing a decrease of approximately 57.6% when compared to HK$107,055,000 of 2009. Earnings per share for 2010 was HK 8.9 cents, representing a decrease of 57.4% when compared to HK 20.9 cents of last year.

Cement Business

For 2010, the Group achieved total sales of 2,169,000 tons of cement and clinkers, representing a growth of 28.1% as compared to 2009, whereas the sales amount was HK$702,428,000, representing a year-on-year growth of 23.9%. However, the after-tax contribution to the parent company turned into a loss of HK$24,814,000 from that of a profit of HK$47,773,000 in 2009.

As a result of the severe inflation in Vietnam during the year, most of the production costs increased in various extents, whereas the increase in cement selling price was unable to catch up with the costs increased. Even worse, the cement selling price in terms of USD suffered a decrease due to the VND devaluation. Among the costs of production, coal price and cement bags topped the list of costs increase with about 30% increase for producing per ton of cement. In order to combat inflation, the government increased banks’ lending rate substantially to as high as 16-18% per annum for VND borrowings. The surging lending rate has thus increased the burden of interest expenses of the cement plant on its local borrowings. Together with the impact of the VND devaluation, the cement plant resulted in an operating loss for the year 2010.

On the market side, the surging interest rate also caused the pace of development for most of the infrastructure projects to be slower or to a halt. Thus, the demand of cement in the market was less than expectation during the year. Whereas the supply of cement increased during the year as a result of the commencement of some newly setup cement plants in Vietnam. Furthermore, due to a shortage of electricity supply in around mid-year of 2010, the Group’s cement plant had to stop its production periodically, which therefore resulted in a loss of an estimating 100,000 tons of cement produced for the year.

Foreseeing 2011, since some of the new cement plant projects have been suspended and some of the less efficient cement plants have also been put aside from production, the supply growth in Vietnam will be slowed down for 2011. Whereas on the demand side, as Vietnam is still a country which need large scale development of its road system, housing and infrastructure projects, the demand of cement is expected to grow continuously and increasingly in the forthcoming years.

As the Vietnam’s government has further devaluated VND in the beginning of 2011, and up to date the VND rate to USD has been devaluated for about 9.3% (according to rates quoted by the State Bank of Vietnam), it shall impact to the cement plant’s profit contribution to the Group for the first half of 2011. Since VND is not a freely convertible currency and that the deviation of interest rates between VND and USD is as high as 12-13%, hedging instruments are either very limited in the market, or the cost of adopting such hedging instruments is exceptionally high and ineffective. As a result, the Group has not adopted any hedging instrument to hedge against its exchange rate risk. The Group’s cement plant has increased the selling price of cement for about 15% since the beginning of 2011, which can cover part of the increase in costs as well as to set off part of the effect of devaluation.

Although still being affected by uncertain factors such as the inflation and the VND devaluation, the management is cautiously optimistic to the development of the Group’s cement business for the year of 2011.

Saigon Trade Centre and Property Investment

Being affected by negative factors such as climbing inflation rate, soaring trade deficit and substantial drop of foreign exchange reserve, the Vietnam’s long-term foreign currency sovereign credit rating was lowered to BBfrom BB by Standard & Poor’s during 2010. In addition, the devaluation of VND by the government also contributed to the uncertain factors to the Vietnam’s economy. Consequently, Vietnam recorded a 20% drop of foreign direct investments for the full year of 2010 as compared to last year. Besides, foreign investors already investing in Vietnam were also taking a more precautionary attitude in actualizing their investments in Vietnam.

Under the circumstances, the leasing situation of the Saigon Trade Centre was thus being affected. In addition, there was also new supply of office spaces coming into the market during the year. As at 31 December 2010, the occupancy rate of the Saigon Trade Centre was 76%, being remained the same as last year. Yet, the average rental rate continued to decline during the year, resulting in a 12% drop of the total rental income as compared to last year. Besides, the tax preferential period for the Saigon Trade Centre was ended. Starting from 2010, the profit tax rate of the Saigon Trade Centre has increased from 12.5% to 25%, resulting in a decrease in net profit after tax contributing to the Group.

Looking forward to 2011, it is believed that the foreign direct investments shall grow in a better rate than 2010, leading to an increase in demand for office spaces. On the other hand, the supply of office spaces is also increasing in the market. It is expected that the occupancy rate of the Saigon Trade Centre shall grow modestly whereas rental rate shall remain steady for 2011.

The rental income of the Group’s other investment properties located in Hong Kong and the PRC have been stable during the year.

Property Development

As the interest rate ran high during the year, with the mortgage interest rate reaching 20% per annum, the property market in Vietnam turned stagnant. Property transactions were minimal and property prices also declined. But the extent of decline was not much, thanks to the high inflation rate and VND devaluation. The market for developing of new property also came into stagnant. In view of the market situation and the complicated procedural applications, the Group’s project in Binh Thanh District, Hochiminh City has been progressing in a slow pace.

The Group’s another joint venture project in Binh Chanh District, Hochiminh City was not running smooth as well. The plot ratio of the project undertaken by the Vietnamese partner in according to the contract has not been granted by the relevant authorities in Vietnam. Despite efforts in resolving the issue, no resolution has been achieved yet, which therefore has also caused the delay in the pre-determined schedule of the project. The Group strives to resolve the issue with the Vietnamese partner within this year.

Benefited from the soaring prices of natural resources, Mongolia’ economy and investment atmosphere obviously improved. The property market has seen recovering though in a slow pace. The Group will adjust the development and selling strategy of its property project in Mongolia in according to the market conditions.

Traditional Chinese Medicine ("TCM") Business

The Group’s TCM business recorded a turnover of HK$1,618,000 and an operating loss before deducting noncontrolling interest of HK$2,559,000 for the year ended 31 December 2010 (2009: loss of HK$5,494,000).

Dividend

The board of directors recommended to distribute a final dividend of HK 2 cents per share to the shareholders and together with the interim dividend of HK 4 cents per share already distributed, the total dividend for the full year of 2010 will be HK 6 cents per share.