For and on behalf of the Board of directors (the "Board") of Sino Union Petroleum & Chemical International Limited (formerly known as "Minglun Group (Hong Kong) Limited") (the "Company"), I am pleased to present the annual results of the Company and its subsidiaries (the "Group") for the year ended 31 March 2006.
 
 
 
 
The Group recorded a turnover of HK$554,686,000 for the year ended 31 March 2007 (2006: HK$577,729,000) from trading of PU materials. Meanwhile, the profit attributable to shareholders was approximately HK$8,063,000 (2006: HK$15,567,000). Basic earnings per share from continuing and discontinued operations is HK0.63 cents (2006: HK1.30 cents).
 
 
 
 
The competition on the market of PU materials continued to be rigorous, although the economic condition in general has improved. As a result, the Group has still adopted a selective approach in accepting PU trading orders by ensuring that these transactions will meet the minimum profit criteria in order to reduce the risk exposure in the competitive environment.
 
 
This year was a transformational milestone for the Group which has undergone a series of business expansion. On 25 May 2007, the Group has successfully acquired 100% shareholding in Madagascar Energy International Limited (“MEIL”). MEIL was vested with the rights to engage in oil & gas exploration for an 8 year period and exploitation and operation for 25 years (for oil) and 35 years (for gas) respectively at Madagascar Oilfield Block 3113, an onshore site with total area of 8,320 kilometers in the Republic of Madagascar. The Group has appointed Netherland, Sewell & Associates, Inc. (“NSAI”), a respectful firm of international independent reserve consultants based in Texas, U.S.A., as its technical advisor of the Group. NSAI has issued a technical report which concluded that oilfield block 3113 has ample reserves of light crude oil. For details, please refer to the Company’s circular dated 10 May 2007. MEIL also entered into a service contract (“Service Contract”) with BGP Inc. (“BGP”) ( 中國石油東方物理國際公司) on 30 May 2007. Pursuant to the Service Contract, BGP shall provide exploration and oilfield development services for the onshore oilfield block 3113 in Madagascar. The total contract sum of the Service Contract depends on the manpower and time required for completion of the work and it is preliminarily estimated to be approximately US$12 million.
On 3 April 2007, the Group entered into a supply and purchase agreement with Foshan Hua Heng Petroleum and Chemical Limited (“Foshan Hua Heng”) and Foshan Electricity Fuel Company (佛山市區電力燃料公司), pursuant to which the Group has agreed to supply 360,000 tons of fuel oil (with model no.180CST) at the prevailing market price to the Foshan Hua Heng for its resale to Foshan Electricity Fuel Company during the contract period of 23 April 2007 to 23 April 2008. Foshan Hua Heng has undertaken and guaranteed that the profit margin of the Group for the sale of 360,000 tons fuel oil shall not be less than RMB 25.2 million, and Foshan Hua Heng shall pay at least RMB 2.1 million per month to the Group for its profit margin of the monthly sale of 30,000 tons fuel oil to Foshan Hua Heng.
On 21 June 2007, a wholly-owned subsidiary of the Company, entered into an agreement to acquire from an independent third party (the “Vendor”) 60% equity interests in Zhuhai Zhonghuan Petroleum Limited (“Zhonghuan”) and its subsidiaries (the “Zhonghuan Group”) Zhonghuan is owned as to 84% by the Vendor and 16% by 中國石油深圳石油實業有限公司. The Zhonghuan is an investment holding company and it owns the entire equity interests in 茂名中寰實業有限公司 (Maoming Zhonghuan Limited) and 49% equity interests in the joint venture, namely 肇慶中寰石油有限公司 (Zhaoqing Zhonghuan Petroleum Limited), which is owned as to 51% by 中國石油天然氣股份有限公司華南銷售分公司 (Huanang Sales Branch Office of CNPC). The Zhonghuan Group is principally engaged in the trading, transport and storage of petroleum and chemical products. It owns the trading right of petroleum in the People’s Republic of China (the “PRC”) and has established an extensive distribution network in the PRC. Major assets of Zhaoqing Zhonghuan Petroleum Limited include a land of approximately 42,470 square metres, a building premises of gross floor area of approximately 4,000 square metres, an oil depot of approximately 30,000 cubic metres and an oil jetty with capacity of approximately 3,000 tons in ZhaoQing (肇慶), the PRC while Maoming Zhonghuan Limited owns a land of approximately 193,000 square metres and the ocean use right for a coastline of approximately 500 meters in Maoming (茂名), the PRC. The Zhonghuan Group’s oil transportation and storage capability together with its well-established distribution network in the PRC will create synergy to the Group’s oil exploration and exploitation business by providing a reliable logistics force and an effective sales channel for the transportation and sale of the Group’s petroleum products from Madagascar. Moreover, as Maoming is one of the major cities for oil and chemical refinery industry in the PRC, where tremendous demand for oil transportation and storage services exists, the Directors are optimistic about the future development of the business of the Zhonghuan Group.
 
 
 
 

Due to the soaring crude oil prices and the increasing demand from the PRC for crude oil, the Group will continue its business restructuring by diversify into the upstream areas of oil and gas industry. The country like Madagascar with ample natural resources will provide opportunities for the Group to explore and the Board is dedicated to strive for advancement in profitability by penetrating each channels by means, of but not limited to, merger, acquisition or establishment of new business units.

I would like to thank our management team and all our staff for their untiring efforts and significant contribution during the past year. I would also like to take this opportunity to express my sincere gratitude and appreciation to all our fellow shareholders and institutional investors for their continuous support and confidence in our Group.

 
 
 
 
 
 
Hui Chi Ming
Chairman
Hong Kong, 27 July 2007
 
 
 
 
 
 
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