Chairman's Statement

On behalf of Bright World Precision Machinery Limited (“Bright World” or “the Group”), we are pleased to report another year of encouraging performance in financial as well as business performance and efficiency for the 12 months ended 31 December 2007 (“FY2007”). The Group recorded an increase of 26.0% in turnover year-on-year to RMB566.4 million in FY2007 from RMB449.3 million in the 12 months ended 31 December 2006 (“FY2006”). Gross profit grew 13.1% to RMB192.3 million in FY2007 from RMB170.1 million in FY2006 despite increases in raw materials costs of iron and steel. In tandem with this growth, the Group’s full year net profit increased 24.6% to RMB144.3 million in FY2007 from RMB115.8 million in FY2006.

Strong demand for high performance stamping machines

FY2007 saw continued strong demand for stamping machines in the PRC. Industrial upgrading as well as capacity expansion amongst manufacturing companies there led to strong demand, particularly for higher performance stamping machines. The sales of high performance stamping machines continued to outpace that of our conventional stamping machines, accounting for a substantial portion of the revenue for FY2007. Sales of high performance stamping machines increased by 44.7% while sales of conventional stamping machines grew 12.0% in FY2007, compared to the year before.

Impact of Rising Raw Material Cost on Margins

In FY2007, the Group witnessed some increase in raw material prices, in particular, iron and steel prices. These rising prices have impacted stamping machines manufacturers across the PRC and we were no exception.

Since the beginning of FY2007, as raw materials prices started to rise, we took the opportunity to hold our selling prices steady thereby gaining market share over our competitors. We only started to raise our selling prices to partially off-set the increase in raw material prices in the fourth quarter of FY2007. Overall, our gross margins edged down from 37.8% in FY2006 to 34.0% in FY2007, as a result of this strategy.

Nonetheless, being a vertically integrated manufacturer of stamping machines, we believe we are in a better position to maintain healthy gross margins as we continue to manufacture most of our components in-house and achieve cost savings from production efficiency.

In addition, the higher gross profit contribution from high performance stamping machines (with more value added features and higher selling prices) also partially offset the increases in raw material prices.

Strategic Focus on Innovation and Upgrading Reap Benefits

Overall, our strategic focus on innovation and upgrading continues to pay off. High performance stamping machines had contributed significantly to both revenue and profitability over the past two years and would continue to be a key contributor to the Group for years to come.

As part of our innovation, upgrading and expansion drive, since early 2007, we had begun to construct a new production plant of 20,000 sqm dedicated to manufacturing heavy machine tools and higher tonnage stamping machines that offer greater precision and more value added features. In early 2008, the
production plant had been retrofitted and production of a newer range of machines had begun.

In FY2007, we started to develop, produce and market a new range of cutting and bending machines that are complementary to our range of stamping machines. Manufacturers who use our stamping machines would gradually be introduced to our cutting and bending machines and be assured of the same quality and service
they have had from Bright World.

Looking Forward

Our Directors believe that the overall demand for stamping machines will remain strong as the PRC will continue to be a global manufacturing hub. This is advantageous to us as the stamping industry forms the backbone of many manufacturing industries including automobile, hardware, electrical appliances
and electronics, IT and computer peripherals.

Due to continued challenges in terms of rising raw material costs, we foresee consolidation amongst smaller players in this industry. This presents us with opportunities to gain more market share and we would be expanding our capacity to meet rising output in the coming year.

In terms of product mix, we expect the positive shift towards high performance stamping machines to continue. Today, our high performance stamping machines, such as the JH21 series, have gained wide industry acceptance since it was launched a few years ago. It is our strategic intent that we develop and introduce newer product series every year such that some of these product series will become key contributors to our revenue and profits for many years to come.

Appreciation

In conclusion, on behalf of the Board of Directors, we would like to take this opportunity to thank all our staff, customers, business partners and associates who have in one way or another contributed to moulding Bright World into a stronger player in the stamping machinery industry. To our shareholders, we thank you for your continued confidence, support and interest in our Group and we are committed to deliver strong performance in many more years to come.