Despite a decline in national cement demand, Asia Cement (China) Holdings Corporation increased its total sales volume of cement products for the year ended 31 December 2015 by 2% year-on-year to about 30.38 million t, crossing the mark of 30 million t for the first time. However, affected by a significant drop of 20.3% in cement price, revenue and gross profit of the Group retreated by 22% and approximately 50% year-on-year to RMB6 391 165 000 and RMB956 262 000 respectively for the year. The percentage decrease in cement price and gross profit of the Group was similar to those of the industry. The Group’s gross profit margin slipped to 15% from % in 2014.
During the Year, the Group reported a loss attributable to owners of the Company of RMB299 123 000, as opposed to a profit of RMB790 313 000 for 2014. The loss was mainly due to the significant drop in gross profit and foreign exchange loss from US dollar-denominated bank borrowings as a result of the devaluation of Renminbi. Basic loss per share was RMB0.191 (2014: basic earnings per share were RMB0.507).
In acknowledgement of the continuous support from the Group’s shareholders, the Board of the Company recommends the payment of a final dividend of RMB5 cents per ordinary share for the Year (2014: RMB15 cents).
The Group had taken various measures to cope with the increasingly competitive and difficult operating environment of the cement industry. These included cost-efficiency measures, internal management reform, international market expansion, and flexible marketing strategies. As a result, the Group lowered its total cost of cement production by % year on year; increased its management efficiency; exported a total of 230 000 t of different cement products to Singapore, the United States and other overseas markets during the Year; as well as expanded sales to areas near its production plants and increased market influence in its core markets. In addition, the Group had adhered to high-level environmental protection and green development strategy, achieving high environmental protection and energy efficiency standards within the industry.
By geographical region, approximately 70% of the Group’s cement capacity (about 24 million t) was located in central and downstream regions of Yangtze River. The Group was among this region’s largest cement enterprises in terms of production capacity. In Wuhan, Jiujiang and Yangzhou, the Company ranked the first in market share, while in Nanchang ranked the second. With over 10 years of dedication to market development and high quality product and service assurance, the Group’s Skyscraper brand was favoured by customers, and enabled the Group to increase sales volume and market influence in its core markets such as Wuhan, Nanchang and Jiujiang. As such, against the unfavourable backdrop of declining market demand, the Group sold a total of 22.42 million t of cement products in the region in 2015, which was basically close to 2014’s 22.93 million t.
In the Chengdu region, the Group had a total cement capacity of 11 million t, being the largest cement producer in the region and ranked the first in market share. Chengdu market was also under pressure from declining demand in 2015. The Group dedicated its effort to increasing sales, and sold a total of 7.96 million t of cement products in Southwestern region, representing an increase of 910 000 t or 13% from 2014’s 7.05 million t.
Looking into 2016, Mr Hsu Shu-tong, Chairman of Asia Cement (China), said: “We expect the industry to ‘first fall and then rise’ in 2016. It is expected that in the first half of 2016, the cement market will continue 2015’s gloomy situation, but demand will gradually recover with the commencement of infrastructure construction. Furthermore, self-discipline and consensus on energy saving and emission reduction among industry players are expected to be strengthened. The above factors together with the implementation of measures to ‘eliminate excessive capacity’ and rise in industry concentration level are expected to lift the market quantity and price.”
The Group remains optimistic about the future development of China’s cement industry. 2016 is the first year of China’s 13th Five-Year Plan. According to the central government’s proposals on formulating the 13th Five-Year Plan on National Economic and Social Development, 2020 has been set as the target for China becoming a high income economy. As such, the next five years (the 13th five-years) will be crucial for the country to become a high income economy. The government will be determined to keep a stable annual growth rate. The implementation of “One Belt and One Road” policy and “Yangtze River Economic Belt” development strategies will also spark off a massive amount of new infrastructure projects.
“The Group has taken a humble attitude in the face of an increasingly severe industry environment. It is determined to improve itself by carrying out thorough review and analysis of its weakness so as to correct it and by striving to explore new directions for development. All these are aimed to achieve sustainable growth and profitability in 2016. We will strive to seize the opportunities arising from the government’s intensified reform on the supply side and acceleration of merger and acquisition activities within the sector, to keep exploring suitable strategic partners and targets for merger and acquisition, with the aim to become one of the top 10 cement groups in China,” added Mr Hsu.
In 2016, the Group plans to sell a total of over 32.30 million t of cement products, representing an increase of 1.9 million t or 6% from 30.38 million t in 2015.
Adapted from press release by Rebecca Bowden
Read the article online at: https://www.worldcement.com/asia-pacific-rim/24032016/asia-cement-2015-results-767/
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