China Dongxiang (Group) Co., Ltd. Announces Annual Results for the Year Ended 31 December 2012

(20 March 2013, Hong Kong) – The leading international sportswear brand enterprise in the PRC, China Dongxiang (Group) Co., Ltd. ("China Dongxiang" or "the Group"; HKEx stock code: 3818) announced its annual results for the year ended 31 December 2012.

Challenges in China sportswear market remained severe in 2012. Macro economic downturn and keen competition continuously adding pressure on players in the industry. For the year ended 31 December 2012, the sales of the Group was RMB1,772 million, decreased by 35.4% compared to last year and the Group's net profit attributable to equity holders reached RMB177 million, representing a year-on-year increase of 73.5%. Basic earnings per share were RMB3.19 cents, an increase of 75.3% compared to last year. As at 31 December 2012, cash and bank balance including treasury products of the Group reached RMB4,974 million, allowing the Group greater flexibility in the implementation of long-term development strategies. According to the Group's general dividend policy, we recommend the distribution of 30% of the Group's net profit attributable to equity holders for the year ended 31 December 2012 as the general dividend. In addition, taking into consideration the affluent cash flow of the Group, the Board recommends an additional payment of 40% of the Group's net profit attributable to equity holders for the year ended 31 December 2012 as special dividend. As a result, the overall dividend payout ratio for the year ended 31 December 2012 is 70%.

Mr. Chen Yihong, Chairman, Chief Executive Officer and Executive Director of China Dongxiang, commented, "Looking back at 2012, brand operators in the sportswear industry continued to struggle with the clearance of excessive inventories accumulated in the market and competition intensified. Coupled with recession in the macro economy, growth in retail sales also witnessed a decline, which presented China Dongxiang with unprecedented defiance. Nevertheless, amidst all the challenges, we enhanced our operational efficiency by reasonably utilizing our available resources during the year. The Group also successfully sustained its solid financial position, which strengthened the Group's foundation for long-term growth."

In the year under review, the Group cleared inventories totaling RMB1.3 billion in terms of tag price as planned by means of e-commerce, factory outlets and distribution channel. The Group also effectively managed the supply chain by making assessments on actual market situations and establishing a conservative sales order target. As at 31 December 2012, the Group had a total of 2,009 Kappa retail stores operated directly or indirectly by 33 distributors in the China segment. The establishment of the local retail branch office in Hunan achieved satisfactory performance, which laid a solid foundation for the Group's "brand + retail" operating philosophy.

During the year under review, the Group continued to adopt "smart marketing" which included the usage of social networks, online drama series, micro-movies and talk-of-the-town topics, and infuse Kappa into consumers' daily lives. Kappa also sponsored various major sports events to enhance its brand awareness. Kappa launched various popular series in the year, including Kappa Essential, which emphasizes mix and match with basic elements; Kappa Polka Dots, which themed with dots; Kappa Graphic Tee, which inspired by English culture; and Kappa Trail Running footwear series, to cope with consumers demand in design and functionality. In addition, the Group's brand for outdoor products, Phenix, underwent stable development in both the Chinese and Japanese markets. The internally-developed Levec series, the Epic Extreme series that adopted the use of complete waterproof materials, and the Down Apparel series were all popularly received by the market.

Looking forward, the Group shall continue to clear excessive inventories to a reasonable level. The stock clearance experience since 2011 has enabled the Group to establish an effective routine on clearance channels. Meanwhile, the Group will also lay out a prudent order strategy and ensure the sell-out rate of retail outlets by replenishing the channels with prop orders so as to cope with the demand for new products. Looking at product innovation and branding, the Group will emphasize product details and product differentiation to provide a unique product experience to customers. The Group will continue to deepen the "brand + retail" operating philosophy to improve infiltration of retail outlets, and continue to optimize the supply chain by improving its flexibility and establish a supply chain platform with swift response.

Mr. Chen concluded, "The sportswear sector is faced with a challenging situation in the macro economy and operating environment, which is unlikely to turnaround for the better in the near future. Nevertheless, leveraging on the experience and enthusiasm of China Dongxiang in the Chinese sportswear industry, the Group’s strong financial position and clear vision and strategies, the Group shall seize opportunities arising from the recovery of the industry. Looking forward, we will continue to be market-driven and launch more innovative products based on the fondness and needs of customers. We will also strengthen the positioning of our Taicang R&D center and increase its ratio of new product development. Meanwhile, the Group will optimize the supply chain to enhance production flexibility and accommodate the business model of pre-orders and prop orders. The Group will also effectively utilize promotional resources by adopting smart marketing for steady development under a challenging market condition, seize opportunities for stable development."

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.