iSteelAsia Announces 2004/05 Third Quarter Results

(February 3, 2005 — HONG KONG) iSteelAsia Holdings Limited ("iSteelAsia" or the "Group", stock code: 8080) today announced its unaudited consolidated results for the nine months ended December 31, 2004.

During the period under review, the gross margin increased 39% to approximately 3.2% by comparing the gross margin for the same period of last year, representing the Group's resolute efforts in achieving higher profit margins. However, the Group's profitability was continuously affected by the adverse market environment following by the deployment of macro-entrenchment policies in China. Turnover for the three months ended December 31, 2004 amounted to approximately HK$244 million, representing a 21% decrease over the last corresponding period.

In light of the current volatile market, the Group made an aggregate provision for diminution in value including inventories, receivables, deferred tax assets and deposits in dispute amounting to HK$9.89 million, resulting of a net loss of approximately HK$6.29 million for the three months ended December 31, 2004. Taking out the effect of such provision, the Group has actually achieved profit from operations of approximately HK$3.6 million in the quarter. It is expected that unless market condition deteriorates dramatically, full utilization of such provision shall not be necessary. Basic loss per share for the quarter was HK$0.39 cents.

Desmond Fu, CEO of iSteelAsia, said "The Group has been facing a very tough operating environment with its market still in turmoil under the influence of selective austerity measures implemented by the Central Government last year and unprecedented price volatility. With the adverse effects of the macro-entrenchment still lingering on, the proportion of the steel consumption in national economy had decreased accordingly. As such, the management has made substantial efforts in allocating the limited resources to selected higher margin steel products and optimizing its resources for economy of scale to achieve further business growth."

The Group has successfully raised its operational efficiency as operating cost was down by over 15% for the nine months ended December 31, 2004, comparing with that of the same period last year. The Group will continue to undertake rationalisation of its resources to achieve the best operational efficiency, building a solid foundation for future growth.

Desmond, commenting on the future, "Despite the uncertainties and price volatility in the market, we are still optimistic about the Group's future. We believe that the macro-entrenchment policies will ultimately bring in long-term benefits to the steel industry in the PRC, helping to build up a more stable and sustainable growth environment for the whole industry in the long run."

China's crude steel production of December 2004 continued upward trend set in the past month with a total production of approximately 27.2 million tons. China is once again the largest producer of crude steel and accounted for 25.8% of all crude steel produced in the world in 2004. China's crude steel market is expected to grow in 2005 with production forecast for the whole year amounted to 300 million tons. It is obvious that China has the vast potential for the Group to flourish. We will pro-actively seek to improve our financial position so as to place iSteelAsia in good standing for facing challenges ahead. In addition, iSteelAsia will make every endeavour to increase the shareholders' value by continuing to enhance its revenue base and customer bases." Desmond concluded.

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For further information, please contact:

iSteelAsia Holdings Limited
Ms. Betty Jane Leon
Senior Marketing Manager
E-mail: betty.leon@isteelasia.com