In response to the call of the Branch Bureau of the Economic and Technological Development Zone of the Changchun Bureau of Land and Resources in 2010 for the proposed resumption of land in the Changchun Economic and Technological Development Zone for urban development planning in Changchun, the PRC, Extrawell Pharmaceutical Holdings' (HKG:0858) 73%-owned subsidiary, Changchun Extrawell Pharmaceutical Co., Ltd., has entered into a land resumption and compensation agreement with Changchun Economic Technological Development Zone Land Reserve Centre for the surrender by Changchun Extrawell of its land and production facilities in the Changchun Economic Technological Development Zone to the land reserve centre on or before 30 September 2013 for a cash compensation of RMB47.112 million, Extrawell Pharmaceutical announced.
The property is currently used as the production facilities of Changchun Extrawell for the production of pharmaceutical products, which accounted for 15% and 23% of the total revenue of Extrawell Pharmaceutical for the year ended 31 March 2011 and for the 6 months ended 30 September 2011, respectively.
As at 30 November 2011, the net book value of the property amounted to HK$29 million. It is anticipated that Extrawell Pharmaceutical will record a gain from the resumption of HK$27 million (exclusive of land appreciation tax, sales tax and other professional fees to be incurred, if any), being the difference between the compensation and the net book value of the property as at 30 November 2011.
Extrawell Pharmaceutical intends to relocate the existing operation and production of Changchun Extrawell to Extrawell Pharmaceutical's new production facilities at the Economic Development Zone of Jiu Tai, Changchun progressively, and to continue the operations and production of Changchun Extrawell at the property until the commencement of operation of the new production facility, which is expected to be in the first half of 2013. The directors of Extrawell Pharmaceutical believe that disruption to the existing operation and production of Changchun Extrawell will be insignificant due to such relocation arrangement.