Acquisition in China

Renold is pleased to announce the acquisition of a 90% interest in the industrial chains manufacturing business of HangZhou ShanShui ("HZSS").

HZSS, operates from a large production plant based in Zhejiang Province, People’s Republic of China, has annual turnover of approximately US$9m and more than 400 highly skilled employees. This workforce will represent about 30% of Renold’s worldwide employees directly involved in the manufacture of chains. The agreed price of US$4m represents net asset value and will be settled in cash. The acquisition will significantly increase the Group’s future available manufacturing capacity, and will remove the need for US$8m of budgeted capital expenditure for this year.

The acquisition, which has received regulatory approval in China, and which is expected to complete in June, will significantly increase the percentage of Renold production in low cost countries ("LCCs"). The Group’s "PACE" objective of growing headcount in LCC chain manufacturing to over 40% of the Group total by the end of 2008/9, was set out in the Group’s announcement of 8March 2007.

The acquisition also reinforces the Company’s position as a global leader in the manufacture of industrial chains by opening up new markets and customers in China and South East Asia.

The business will be called Renold Hangzhou, and is expected to increase group sales and be earnings enhancing after 12 months. The outlook for the sectors that it serves remains broadly positive with particular opportunities in its domestic markets.

An update on the progress of "PACE" and the impact of this acquisition will be included in the results announcement for the year to 31 March 2007 which is expected to be released in June.

Bob Davies, Chief Executive of Renold, commented:

"The purchase of this substantial Chinese manufacturing facility will underpin the execution of our ‘PACE’ restructuring and will boost margins to a run rate greater than 10% by 2008/9."


"HZSS has the strongest technology of all the potential acquisition targets we looked at. It also provides a major growth opportunity in the domestic Chinese market and into other parts of South East Asia."

21 May 2007