Displaying items by tag: CNBM
South Korea: The South Korean Fair Trade Commission has approved the pending merger of China National Building Material (CNBM) and China National Materials (Sinoma). CNBM and Sinoma formerly entered into a merger agreement in September 2017.
Beijing Triumph International Engineering to build US$160m cement plant in Uzbekistan
03 November 2017Uzbekistan: Beijing Triumph International Engineering, a subsidiary of China National Building Material’s (CNBM), has signed a US$160m deal with Eurocement’s subsidiary Akhangarancement to build a new 3Mt/yr cement plant. The contract was signed during Russian Prime Minister Dmitry Medvedev's official visit to the Central Asian country, according to InterFax. The project will be completed by 2020. Eurocement chairman Filaret Galchev and Uzstroymaterialy chief executive officer (CEO) Botir Zaripov signed the agreement on project implementation during Medvedev's visit.
Akhangarancement operates a 2.2Mt/yr cement plant. It holds a 30% share of the Uzbek market. The plant also exports to Kazakhstan, Kyrgyzstan and Turkmenistan. Eurocement purchased a 75.5% stake of Akhangarancement in August 2006 and bought the remaining share in 2013. It originally signed a US$128m contract with China CAMC Engineering, a division of Sinomach, in 2014 for construction of a plant that was supposed to open in 2016. However, construction was subsequently cancelled.
CNBM and Sinoma enter into merger agreement
11 September 2017China: China National Building Material (CNBM) and China National Materials Company (Sinoma) have entered into a merger agreement. The exchange ratio has been set at 1 Sinoma share to exchange for 0.85 CNBM share. After the merger is completed Sinoma will be absorbed into CNBM. Merger preparations for the two state-owned companies have been on going since mid-2016 when the Assets Supervision and Administration Commission announced the move.
CNBM is the largest cement company in the country with a reported total production capacity of around 409Mt/yr. Sinoma is a cement engineering company and the fourth largest cement producer in China with a total production capacity of approximately 112Mt/yr. The merger is part of the government’s plans to consolidate production domestically and refocus its industries internationally as part of the ‘One Belt, One Road’ initiative.
China embraces alternative fuels
29 March 2017Lots of fascinating information has been emerging in recent weeks about changes in the Chinese cement industry as the larger producers have published their annual financial results. One example is the focus on using alternative fuels to fire up kilns. As explained below, the spotlight on co-processing is state-mandated and this is why the producers are now keen to promote their adherence. Even so, as ever with China, the scale of the change is staggering.
For example, Anhui Conch reported that it had completed 15 waste treatment projects and one sludge treatment project in 2016. In addition it had three projects still undergoing construction at the year-end. The group said that it co-processed 600,000t of domestic waste in its cement kilns in 2016. All of this was achieved by a company that says it only started co-processing municipal waste from its first project in 2010. China Resources Cement’s (CRC) progress was slower but it managed to start a co-processing project at its plant in Binyang County, Guangxi in December 2015 and a sludge project in Nanning City, Guangxi in July 2016. New projects at Tianyang County, Guangxi and Midu County, Yunnan are being built at present, with completion expected by the end of 2017.
Long held rumours about production overcapacity in China came to head in 2015 with the National Bureau of Statistics in China (NBSC) reporting that sales dropped in 2015 following a decade of steady growth. Then the results of most of major producers followed this by falling in 2015. CRC presented a good history of what happened next in the Chinese cement industry in its results report [LINK]. In brief, in 2016 the Chinese government implemented supply-side structural reforms focusing on production efficiency, reiterating attempts to stop new production capacity being built and pushing environmental reforms. Throughout the year various government offices released guidelines to encourage market consolidation, cut obsolete production capacity, increase co-processing rates and decrease the energy needed to produce each tonne of clinker.
Graph 1: Cement sales in China, 2012 – 2016. Source: National Bureau of Statistics in China.
Whether or not any of this has helped the Chinese cement industry to overcome the problems it faced in 2015 is unclear. As Graph 1 shows, Chinese cement sales started to rise again slightly to 2.35Bnt in 2016 from 2.31Bnt in 2015. Sales revenue from some of the major cement producers presents a more varied picture as can be seen in Graph 2. Anhui Conch’s revenue rose by 9.7% year-on-year to US$8.12bn in 2016, China National Building Material Company’s (CNBM) revenue rose by 1% to US$14.8bn and CRC’s revenue fell by 4.2% to US$3.3bn. CRC may have suffered here from its relative business concentration in southeast China. Both Anhui Conch’s and CNBM’s results seemed to look patchy in mid-2016 when they released their half-year reports, but both sales and profits seemed to pick up sharply in the second half of the year.
Graph 2: Sales revenue from selected major Chinese cement producers. Source: Company annual reports.
As the current set of structural reforms kick in within the Chinese cement industry it will be interesting to see what happens next. From plans to cut 10% of local clinker production capacity by 2020 to ambitious environmental aims the sector barely has time to catch its breath. The question is whether the major producers balance sheets are being helped more by a recovering local market or by the reforms. Either way the uptake of alternative fuels is encouraging.
Can China’s cement companies merge themselves into profit?
30 August 2016Check out this graph of Chinese cement prices from September 2015. An author at Business Insider attributes it to Larry Hu, the Chief China Economist for Macquarie. It pretty much sums up the mood analysts have at the moment regarding the Chinese cement industry.
Figure 1: China cement prices, 2012 – 2015. Source: CEIC, Bloomberg, Macquarie Research September 2015.
The recent announcement by the Assets Supervision and Administration Commission regarding the merger of China National Building Materials Group Corporation (CNBM) and China National Materials Group Corporation (Sinoma) comes hot on the heels of a series of poor half-year financial returns from China’s major cement producers. Attempts to tackle overcapacity in its local cement industry have been underway for a few years now. Actions taken include demolishing outmoded capacity, merging companies and expanding overseas. However as the construction markets have cooled in the country the scope of what the cement industry is facing has become clear, as revenues and profits have tumbled.
Now that the first half cement sales volume data has become available from the National Bureau of Statistics of China (NBSC) the response of the cement industry to its predicament has emerged. As can be seen in Figure 2 there has been a rough trend of sales decline throughout 2014 and 2015. The first half of 2016 has started to buck this trend as sales volumes have risen year-on-year for both quarters.
Figure 2 – Chinese cement production by quarter, 2014 – 2016. Source: National Bureau of Statistics of China.
Sales revenues have dropped for most of the major companies that have publicly released their results for the first half of the year. The exception is Taiwan Cement, which makes a large proportion of its sales revenue outside of China (People’s Republic of China). Its sales revenue in China barely rose year-on-year in the first half of 2016. However, the cement sales volumes for all these companies have started to show what is happening. They have risen for most of the producers examined. Essentially, each of these producers is producing more cement but making less money. As Digital Cement puts it, the industry is in a 'low-profit position.' Increased market competition and endemic industry overcapacity are causing this.
Mergers and acquisitions have been the big story for the European multinational producers following the economic crash in 2007. Returns from low growth markets have been substituted for efficiencies of scale, knowledge sharing and greater international reach. Lafarge and Holcim merged in 2015 and HeidelbergCement is due to complete its acquisition of Italcementi later this year. However, as LafargeHolcim's disappointing financial returns and its continued slew of divestments show so far, the merger has not worked as well as may have been hoped… yet.
Whether China's version of this works with its large state owned enterprises is uncertain. Mergers are meant to cut out inefficiencies through economies of scale. Yet the question remains: can even larger Chinese cement producers do this when they are state controlled and harangued by pressures outside the normal market, particularly when local regions try to preserve their industries. The last such big deal, between Anhui Conch and China Resources Cement, fell apart in July 2016. The plans for CNBM and Sinoma may fare better but if the price of cement keeps falling then the market may have other ideas.
For more information see the China country report in the September 2016 issue of Global Cement Magazine
CNBM and Sinoma start merger preparations
23 August 2016China: The Assets Supervision and Administration Commission has announced the reorganisation of the China National Building Materials Group Corporation (CNBM) and China National Materials Group Corporation (Sinoma). The commission did not provide further details on the merger.
CNBM is the world's major non-metal materials manufacturer, and cement equipment and engineering service provider, with total assets over US$64.5bn. Sinoma is also an industry leader in the construction materials industry. China has started accelerating the reorganisation of its SOEs to improve their competitiveness.
Eurocement to use CNBM investment to cut debt
01 July 2016Russia: Eurocement Group plans to use part of the funds raised from China National Building Materials Group Corporation (CNBM) to reduce its debts. The cement producer told Interfax that, although negotiations are on going, it wants to use some of the funds raised through the Chinese company’s participation in its capital to restructure current debt. It will also use the funding to invest in new ‘high-return’ areas.
Eurocement signed a partnership agreement with CNBM on 25 June 2016 during Russian president Vladimir Putin's visit to China. CNBM plans to develop its business in the construction materials market in Russia and the CIS, including by acquiring an equity stake in Eurocement Group. The total investment could be as high as US$5bn.
CNBM may buy shares in Russia’s Eurocement Group
27 June 2016Russia: China National Building Materials Group Corporation (CNBM) plans to become a shareholder of Eurocement Group. The companies signed an agreement on cooperation in production of construction materials in China on 25 June 2016 in the presence of Russian President Vladimir Putin and President of the People's Republic of China Xi Jinping.
The companies have agreed to upgrade Eurocement’s cement plants and construct new production lines for dry process production of cement. The agreement also envisages establishing clusters for production of construction materials in seven Russian federal districts at the basis of the local company. Local media reports that CNBM will invest US$5bn in the project.
CNBM cancels acquisition of Shanshui Cement
11 May 2016China: CNBM has cancelled its acquisition of Shanshui Cement due to changes in the board composition, disputes regarding the control of Shandong Shanshui Cement Group, the financial difficulties of Shanshui Cement and the prolonged suspension of trading of the shares in Shanshui Cement. It added that the final issue ‘significantly and adversely’ affected the liquidity of the company and impaired attempts to determine the current market price of shares in Shanshui Cement. Shanshui Cement has faced financial troubles since a shareholder battle for control of the company took place in late 2015.
CNBM net profit falls by 83% to US$157m
30 March 2016China: China National Building Material Company's (CNBM) net profit has fallen by 83% year-on-year to US$157m in 2015. Its revenue fell by 17.8% to US$15.4bn. China's largest cement producer has blamed the loss of profits on a steep drop in cement sales due to a national slowdown in fixed-asset investments, infrastructure construction and real estate investments.
Two of CNBM's cement subsidiaries also reported falling financial results. China United saw its sales fall by 28% and South Cement reported that its revenue fell by 21%.
The state-owned building materials company also produces gypsum wallboard, insulation materials and ceiling systems. Revenue from the sale of lightweight building materials fell by 7.6% to US$1.09bn as the price of gypsum wallboard fell. However, revenue from mineral wool insulation sales and composite materials rose by 25.3% to US$501m due to increased sales of pipes, tanks and rotor blades.