China Dongxiang (Group) Co., Ltd. Announces Annual Results for the Year Ended 31 December 2011

(27 March 2012, Hong Kong) - The leading international sportswear brand enterprise in the PRC, China Dongxiang (Group) Co., Ltd. ("China Dongxiang" or "the Group"; stock code: 3818) announced today its annual results for the year ended 31 December 2011.

During the period under review, the adjustment in the PRC sportswear industry has deepened with emerging problems including moderated market growth, intensified competition and inventory accumulation. Amidst all challenges, China Dongxiang recorded revenue of RMB2,742 million for the year ended 31 December 2011, representing a year-on-year decrease of 36%. Together with exceptional items including the additional provision for impairment of inventory and available-for-sale financial assets, profit attributable to equity owners of the Company for the year was RMB102 million, declined by 93% year-on-year. Basic earnings per share were RMB1.82 cents.

The Group announced a one-off repurchase of inventories from distributors to ease their inventory pressure. It is the Group's intention to undergo difficult times together with our distributors and to foster closer relationships. The Group also offered more support to our major customers in order to increase sales channel efficiency, reduce pressure on inventory accumulation and enhance profitability. During the reporting period, the Group has completed the repurchase of inventories of RMB1.45 billion at tag price, and the products are being re-sold through factory outlets and e-commerce platforms.

Total sales from China business including Kappa and other brands accounted for 77% of the Group's overall sales revenue for the year ended 31 December 2011 (2010: 86%). Sales of footwear reached RMB515 million, constituted approximately 25% of total revenue of the Kappa brand (2010: 22%), mainly due to our gradual expanded efforts in research, development and design of footwear. Sales from apparel reached RMB1,507 million, constituted 72% of the total revenue of the Kappa brand.

The Group continued to optimize its sales channels during the year. Under the initiative of sales network consolidation, the Group closed retail stores that recorded unsatisfactory profitability, and the number of retail stores totaled 3,119 as at 31 December 2011 compared with 3,751 as at 31 December 2010, which were operated directly or indirectly by 40 distributors as planned.

The Group continued to develop a diversified product portfolio. During the year, the Group launched the C19 series targeting the popular street sport of Fixed Gear; the new P-A.C series with the theme of "back to basics", the new soccer series, etc. Robe Di Kappa ("RDK") and Phenix also recorded steady development during the year. As at 31 December 2011, there were 24 RDK stores and 18 Phenix stores.

During the year under review, Kappa continued to promote its brand, including large-scale sports event sponsorships such as the China Open, HSBC Golf Championship, sponsoring famous sports teams including German Bundesliga Borussia Champion Dortmund Soccer Team, co-sponsoring Italian Serie A Club AS Roma, and etc.

Despite the major earthquake that happened on 11 March 2011, the Group's Japan business development was encouraging. During that period, our Phenix Tokyo office and Niigata technical centre were paralysed, but luckily none of the staff was injured. Due to structural destructions of Phenix stores, Phenix's product sales was impaired as well. Hence, business performance recorded a sharp decrease shortly after the earthquake. However, the Group's Japan staff tackled adversity with perseverance, carried out in-depth promotion on the retail front, which led to significant results in channel expansion, brand marketing and product promotion.

With regards to design and product research and development, the Group re-invited the renowned Korean designer, who had successfully transformed Kappa brand in the past, and his team. The Group will also cooperate with its Japanese design talents and famous design workshops in the United States and Europe to develop more creative and functional products. The Japanese design workshop actively developed new design techniques, including the Japanese-patented curvy zipper and 3D supersonic stitching.

Mr. Chen Yihong, Chairman, Chief Executive Officer and Executive Director of China Dongxiang, said, "Though the Chinese economy is expected to grow at a steady speed in year 2012, the overall tone of the retail market remains static. Accumulated inventory at retail end remains a key issue. Coupled with intensifying market competition from international brands expanding more aggressively into the Chinese market, further integration of the sportswear industry is still expected going forward. The Group will overcome these challenges pragmatically and through perseverance in the face of a difficult market environment. The Group will continue to design diversified products, enhance brand positioning and optimize distribution network. The Group will look into refining every process of our operation management to lay the groundwork for a more solid foundation for future growth. We believe that China Dongxiang, as an enterprise with clear positioning, innovative and excellent executions, is well-poised to capture promising opportunities in the future."

About China Dongxiang (Group) Co. Ltd.
China Dongxiang (Group) Co., Ltd. (HKEx: 3818) is a leading international sportswear brand enterprise in China and was successfully listed on the Main Board of the Hong Kong Stock Exchange on 10 October 2007. The Group is primarily engaged in the design, development, marketing and wholesale of branded sportswear in China. Currently, China Dongxiang owns all rights to the internationally recognized Kappa and Robe Di Kappa (RDK) Brand in China, Macau and Japan. Its products convey an active, fashionable and youthful image and are warmly welcomed by China's fast growing and high potential consumers. The Group also owns Phenix, the most popular ski brand in Japan with the largest market share, which has gained strong recognition in the international market.