Chairman’s Letter

Dear Shareholders,

On behalf of the board of directors (the “Board”) of CPMC Holdings Limited (the “Company”), I am pleased to present the audited annual results of the Company and its subsidiaries (collectively the “Group” or “CPMC”) for the year ended 31 December 2018 (the “Year”).

In 2018, the global economy experienced volatility and slowdown due to protectionism. In the face of a complex and grim external environment, the government of the PRC adhered to the keynote of pursing progress while maintaining stability, focusing on the supply-side reform to advance the structural adjustments to the economy. The three tough battles, namely major risk prevention and resolution, targeted poverty alleviation and pollution prevention, have achieved a good start, and consumption has played an increasing role as a key economic growth driver. In 2018, the economy of the PRC continued to run within a reasonable range, with a 6.6% GDP growth rate. During the Year, the per capita disposable income of domestic residents increased by 8.7%, outpacing the GDP growth, and the total retail sales of consumer goods grew by 9.0%.

In 2018, with the advancement of “cutting overcapacity, reducing excess inventory, deleveraging, lowering costs and strengthening areas of weakness”, upstream commodity prices remained at high levels, causing the prices of raw materials such as tinplate and plastic particles to rise further. With growing concentration and slowdown of the downstream market, the midstream packaging industry was slowly passing on the rising costs to the downstream customers, posing challenges to the short-term performance of the industry. With continuously shifting competition pattern, China’s packaging sectors, though at different stages, were gradually changing for the better. The tinplate packaging and plastic packaging sectors, currently in the early stage of integration, are relatively segmented and dominated by small and medium-sized enterprises and low-end production capacity. We believe that with the strict implementation of safety and environmental measures and the promotion of consumption upgrade, inferior production capacity will be phased out. The aluminium packaging sector is highly concentrated. Driven by the rapid growth of downstream demand after 2010, many players scrambled to expand production capacity of two-piece cans, causing supply to grow faster than demand in a short period of time and thus intensifying competition. Since the prices of raw and auxiliary materials bounced in 2016, the sector has been shifting from craze to rationality under profitability pressure, and the survival of the fittest has begun. The steady growth and diversification of demand have also digested some excess capacity. Presently, the landscape of the packaging industry is becoming clearer. Foreignfunded enterprises are withdrawing from the Chinese market due to declining competitiveness, while domestic weak players are being merged and marginalised. And high-quality players are carefully expanding and integrating. Overall, the industry is recovering and profitability is expected to improve. Rooted in the domestic market, the Group seized opportunities from the Belt and Road Initiative and closely cooperated with international famous brand customers for overseas expansion with advantageous products. In the Year, the Group launched the first overseas project to promote the internationalisation of packaging business. The project is now running smoothly. Meanwhile, the Group continued to strengthen technological innovation, improve supply chain competitiveness, make benchmarking-based improvements, strictly control costs with multiple measures, enhance operation and management level and labour efficiency, undertake corporate social responsibility, and carry out safety and environmental protection work to maintain green environment and conserve water.

Looking ahead, in view of the changes in the competitive landscape of the packaging industry and the balance between supply and demand, the overall profitability of the packaging industry is expected to improve. Under such a context, the Group will actively tackle the challenges and seize the opportunities by continuing to expand market segments with potential and enhance capacity deployment, strengthening industry synergies, conducting R&D and boosting innovation for continuous improvement in the competitiveness and performance of the Company.

Lastly, on behalf of the Board, I wish to express our sincere gratitude to the management and all the staff of the Group for their valuable service and contribution during the past year. I would also like to express our heartfelt gratitude to our customers, suppliers, business partners, and shareholders for their continuous support to the Group.