SHENZHEN, China, Feb. 8, 2006 (PRIMEZONE) -- New Dragon Asia Corp. (AMEX:NWD) today announced its board of directors has approved a $3.6 million investment to expand the company's packaging operation in Longyuan City, Shandong Province, China, which includes approximately $200,000 to purchase the remaining 45 percent equity interest in the operation owned by an existing joint venture partner.
The expansion of the current operation, which is expected to be completed in the second half of 2006, will include construction of an additional 300,000 square foot facility and the installation of state-of-the-art machinery. The newly formed, wholly owned entity, which will operate as New Dragon Asia (LongKou) Packaging Materials Co. Ltd., will purchase the 45 percent interest in the Longyuan entity and continue to serve the packaging requirements of the company, as well as third-party entities engaged in the manufacture of a variety of consumer products. New Dragon Asia estimates that packaging revenue derived from this third-party business may generate approximately $4.0 million annually upon completion of the expanded operation in July.
"The investment decision to expand the Longyuan operations reflects increased packaging requirements for New Dragon's own products, as well as business from outside customers as a consequence of a successful strategic plan, implemented over the past few years, to market the company's capabilities to address the lack of other comparable quality packaging vendors in the city," said Li Xia Wang, chief executive officer of New Dragon Asia.
She added that the investment in the Longyuan Plant, which currently is operating at 100 percent capacity, is expected to increase capacity by a factor of ten. Wang said a portion of proceeds derived from a recently completed private placement will be utilized to fund the expansion of the packaging operation.
Wang indicated the establishment of the new wholly owned entity, and the acquisition of the remaining 45 percent ownership in the Longyuan packaging facility, entitles New Dragon to continue to benefit from a further two-year Chinese income tax exemption and a 50 percent reduction of future levels of taxation for a three-year period.
About The Company
New Dragon Asia Corp. is engaged in the milling, sale and distribution of flour and related products, including instant noodles and soybean-derived products, to retail and commercial customers throughout China. New Dragon Asia markets its well-established product line through a network of more than 200 key distributors and 16 regional offices in 27 Chinese provinces with an aggregate production capacity of approximately 110,000 tons of flour and more than 1.1 billion packages of instant noodles.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the company's operations and financial performance, condition and success of its acquisition program. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products and pricing; changes in consumer preferences and tastes or perceptions of health-related issues; effectiveness of advertising or market-spending programs; changes in laws and regulations; fluctuations in costs of production, foreign exchange and interest rates; and other factors as those discussed in New Dragon Asia Corp.'s reports filed with the Securities and Exchange Commission from time to time.