Gongyou Machines Ltd.: Rising Revenue and Profit in the July-September 2007 Quarter – Capacity Expansion Leads to Export Growth

In the first quarter of the financial year 2007/08, leading woodworking machine producer Gongyou Machines Ltd. increased revenue and profit, compared with the same period of the previous year.

Unaudited Quarterly results

Revenue

Revenue increased by 13.3%, with strong capacity utilization, due to strong demand for our mid- to high end models.

Our exports grew overproportionally. Our core export markets are Russia, ASEAN and Latin America. We are working on the penetration of new countries and on a stronger presence in existing foreign markets. Our core target is to develop exports into a strong engine of sustained growth over the coming years.

Small low-end machines: Because of margin pressure in this segment, we phase out several low-end models. Such products are sold to the mass market in China. The shift from low-end to high-end machines is in line with our long-term strategy.

The first effects of the capacity expansion program materialized in this quarter. The production capacity in the mid- and high-end segments will further increase in the coming quarters. Combined with strong demand for our products, we expect continuous substantial growth in future quarters.

Profit

Profit before tax grew faster than the revenue. The 14.2% increase was achieved in spite of higher costs in our Singapore holding after the capital rising exercises.

Drivers of higher profit margins are increased exports, a bigger share of large and more complex machines in our product mix and lower administration costs in our manufacturing base in China.

Profit after tax grew by only 0.3%, because a tax holiday program ended on 31.12.2006. Therefore, all quarters of the calendar year 2007 are burdened by a higher tax rate than 2006. The calendar year 2008 will have a tax rate comparable with 2007, so that, from January 2008 onwards, the increase of pre-tax profit should be roughly equal to the increase of net profit.

Revenue and profit in the July to September quarter is typically seasonally weaker than the average of all four quarters.

The management expects double-digit % increase in revenue and profit for the actual financial year (July 2007 – June 2008) and for future years.

A more detailed table of the result will be published on our website www.gongyoumachines.com in the near future.

Dong Yanwei

Chairman of the Board

Gongyou Machines Ltd.

22.12.2007

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