Asia Cement (China) reports huge growth in revenue and profit

Asia Cement (China) Holdings Corporation together with its subsidiaries reported unaudited consolidated revenue and profit of approximately RMB1601.4 million and RMB125.7 million respectively for the three months ended 31 March 2014, representing year-on-year increases of approximately 21% and approximately 1373%, respectively. The leap in the group’s earnings for the period was mainly attributable to an increase in average selling price of the company's products and a decrease in the cost of coal over the same period last year. Furthermore, reduction in the growth of new capacity significantly eased supply pressure compared to previous years. The overall market condition was much better than that of the same period in 2013.

Sales and prices improve

During the period, the group sold a total of 5.29 million t of cement and clinker, representing a 2% increase y/y, while cement prices rose significantly. With a decrease in the cost of coal, the group’s gross profit increased by 165% to RMB385 million and gross profit margin was 24%, up by 13 percentage points from 1Q13.

Along with the implementation of new environmental standards in Mainland China, greater efforts to eliminate obsolete production capacity of the cement industry, escalation of the progress of agricultural modernisation, and gradual execution of measures of new-type urbanisation plan, Asia Cement (China) anticipates a 6 – 8% increase in cement demand in 2014 compared to last year.

As weather conditions improve, demand will rise and help quickly push up prices, which are expected to stabilise at high levels, as the effect of the State’s policy to address overcapacity will begin to be felt starting from the third quarter. In the fourth quarter, which is the traditional peak season, production and sales will flourish.

Mr Hsu Shu-tong, Chairman of the Company, said: “The Group will actively push ahead with various merger and acquisition and cooperation plans, and accelerate the construction of silos in Taizhou to ensure that they can be put into operation in the fourth quarter of 2014 as scheduled. In addition, the Group will consolidate existing sales channels and fully capitalise on its synergy to flexibly adjust raw materials and products among the relevant companies in the central and downstream regions of the Yangtze River.”

Plans for Chengdu City

Earlier, World Cement reported that Asia Cement (China) plans to acquire the entire equity interest in Sichuan Lanfeng Cement Co., Ltd. for RMB1000 million in order to further consolidate the Group's market position in the Sichuan region and enhance its overall market planning and competitiveness.

Sichuan Lanfeng is principally engaged in the business of manufacture and sale of cement, concrete and related products in Sichuan. Sichuan Lanfeng has two new dry process clinker production lines in Pengzhou City, Sichuan with annual production capacity of 5 million t, and an 18 MW pure low temperature residue heat power generation system, as well as a dry mixed mortar production line with annual production capacity of 1.5 million t.

Sichuan Yadong Cement Co., Ltd, a non wholly-owned subsidiary of Asia Cement (China), and Sichuan Lanfeng signed the formal sale and purchase agreement in April and are expected to sign a handover agreement before the end of this month.

“Sichuan Yadong currently has three cement production lines with annual production of 2 million tonnes each, and annual cement production of 6 million t. After the successful acquisition of Sichuan Lanfeng, the annual cement production of Sichuan Yadong will reach 11 million t, which will enable it to achieve the largest market share in Chengdu City,” said Dr. Wu Chung-lih, Chief Executive Officer of Asia Cement (China).

Adapted from press releases by Katherine Guenioui

Read the article online at: https://www.worldcement.com/asia-pacific-rim/14052014/asia_cement_china_reports_huge_growth_in_revenue_profit_192/