China Dongxiang (Group) Co., Ltd. Announces Interim Results for the Six Months Ended 30 June 2012

(22 August 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 its interim results for the six months ended 30 June 2012.

In the first half of 2012, macro-economic conditions remained highly volatile, with deepening European debt crisis and slowing growth in China dominating consumer sentiment, thus creating more obstacles for the retail and sportswear markets. Meanwhile, the influx of domestic and international casual wear brands further squeezed the operating space for the sportswear market, causing the overall sportswear industry to be faced with unprecedented difficulties. For the six months ended 30 June 2012, the Group recorded income of RMB832 million, a decline of 29.4% year-on-year. During the period, net profit was RMB97 million, down 56.9% year-on-year. Basic earnings per share were RMB1.75 cents, a decrease of 56.1% when compared to the same period last year. Despite the decrease in income, the Group has maintained a sound financial position with cash on hand (including treasury products) amounting to approximately RMB4.8 billion as at 30 June 2012. In view of our solid cash position and to enhance shareholders value, the Board proposed to distribute 70% of the profit attributable to equity holders for the six months ended 30 June 2012 as interim and interim special dividend.

Mr. Chen Yihong, Chairman, Chief Executive Officer and Executive Director of China Dongxiang, commented, "Facing the challenging market environment, we upheld the China Dongxiang core values of pragmatism, passion and innovation in the first half, enhanced our competitiveness, and achieved product innovation through hard work, which was one of the most significant achievements in the period. We observed that product homogeneity was worsening in the market, thus performed a careful review of our products and swiftly re-structured our product mix. Our team was fully committed to these innovative products with passionate and enterprising attitude. In a short period of time, we integrated design resources from China, Japan and South Korea to engineer the transformation of the Group's products. This highlighted our brand elements of 'sports, fashion, sexiness, and style', strengthened our unique brand philosophy, and created a series of innovative products."

As at 30 June 2012, the Group had 35 distributors in its China segment that directly or indirectly operated 2,550 retail outlets selling Kappa brand products. In addition, Robe Di Kappa and Phenix retail outlets reached 18 and 26, respectively. The distribution of retail outlets covered all major provincial cities and other major urban areas and towns in China. The Group defined key markets, conventional stores or discount outlets by region and store levels. The Group managed stock clearance and sales of new products simultaneously in different stores to strike a balance while maintaining its brand image.

During the period under review, the Group carried out "smart marketing" for greater cost effectiveness by infusing Kappa into consumers' daily lives through social networks, online drama series, micro-movies and talk-of-the-town topics, which successfully enhanced Kappa's brand awareness. The Group also sponsored and organized different thematic promotion activities to enhance brand positioning together with the use of infotainment, print advertisements and advertorials to promote key products and stimulate product sales. The Group also continued to develop a diversified product portfolio during the period under review. New products including Arch Tech sports shoes, Miss Kappa, Aqua Grip series, and C19 series products were launched.

Looking into the second half, the Group will continue to develop innovative products and optimize sales channel distribution, while focusing on a "brand + retail" business model. Leveraging close relationship with Mai Sheng Yue He Group ("MSYH Group"), a retailer in which the Group holds a stake, both sales teams will have seamless cooperation to achieve the common goal of enhancing sales at the retail end. Through the joint promotion of the "brand + retail" model with MSYH Group, the Group can significantly improve sales efficiency and act as a role model for other distributors.

Mr. Chen concluded, "Despite the turbulent market conditions, we remain profitable and a strong cash position. Based on this solid foundation, China Dongxiang will uphold its corporate philosophy in enhancing its competitiveness in an operating environment filled with challenges. The implementation of this strategic plan will take time, and the Group's financial results and operating performance will inevitably come under pressure in the near term. Nevertheless, we believe these measures will allow the Group to capture more market opportunities when the market rebounds."

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.