Fufeng Group (HKG:0546) has warned that it expects consolidated net profit for the financial year ended 31 December 2011 to decrease on year, notwithstanding the production of the new Hulunbeir Plant of the group commenced in the second half of 2011 with continuous increase in turnover.

The company believes that the group's performance was mainly affected by the following factors: (i) The price of major raw materials showed a growing trend and maintained at a high level during the second half of 2011. Aiming to the completion of industry consolidation, the selling price of the products of the group was slightly decreased, making the gross profit margin for key products decreased significantly during the second half of 2011. (ii) After the new production capacity of the new Hulunbeir Plant commenced operation successively during the second half of 2011, the relevant fixed costs increased significantly. (iii) The increasing interest charges resulted from the issuance of additional USD senior notes by the group on 13 April 2011 mainly for the construction of the new Hulunbeir Plant and new production capacity.