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Displaying items by tag: Anhui Conch
Update on the Philippines, July 2024
24 July 2024Congratulations to Taiheiyo Cement Philippines (TCPI) this week for inaugurating its new 3Mt/yr production line at its Cebu plant. The US$220m line replaces the old line at the site that was closed in late 2021.
The plant was originally built by Grand Cement Manufacturing in the early 1990s. Japan-based Taiheiyo Cement took over in 2001 and later made the decision to upgrade the site in 2017. It then contracted China-based Anhui Conch and Sinoma (Handan) Construction for the project in 2021 and groundbreaking took place in mid-2022. Commercial operation of the new line was previously scheduled from May 2024. TCPI has also invested around US$140m in related projects such as its Jetty and Marine Belt Conveyor project, which links the Cebu plant to the coast via a conveyor. Other parts of this expenditure encompass the Luzon Distribution Terminal Project at Calaca in Batangas and general port development in San Fernando.
The Department of Trade and Industry (DTI) was keen to promote this example of a foreign-owned company investing in local manufacturing. DTI Secretary Fred Pascual pointed out that Japan is the country’s “second-largest trading partner and third-largest source of foreign investment.” He also linked the project to the national Build Better More infrastructure development programme and the Tatak Pinoy Act that was introduced in early 2024 to promote local industry. Along these lines, Republic Cement was awarded the Domestic Bidder’s Certificate of Preference this week. It is the first cement company to receive it. The initiative promotes the use of local manufactured materials in government projects as part of the Tatak Pinoy Act. As one might expect, the Cement Manufacturers Association of the Philippines (CEMAP) supports the Tatak Pinoy Act. It voiced its support for the legislation in June 2024 when the DTI started to implement it. It noted that cement imports were just under 7Mt/yr in 2023 despite the anti-dumping duties imposed on a number of Vietnam-based producers and traders. This compares to a local production capacity of nearly 50Mt/yr.
CEMAP mentioned that new production lines from both TCPI and Solid Cement were expected in 2024. The latter project is a new production line being built at Solid Cement’s Antipolo plant near Manilla in Rizal province. Cemex Philippines held a groundbreaking ceremony for the 1.5Mt/yr line at its subsidiary back in 2019. However, Cemex said it was selling its Philippines-based business to DMCI Holdings and related companies in April 2024. As part of this process Cemex sold its local cement brands to the Consunji family, the owners of DMCI Holdings, in June 2024. Regulatory approval of the divestment is still pending but the sale of the brands suggest that the transaction is progressing. Completion is expected by the end of 2024. Operation of the new line at the Antipolo plant is anticipated from September 2024.
Another forthcoming plant project was announced by PHINMA Corporation in June 2024. It signed a joint venture deal with investment company Anflo Group to build a 2Mt/yr cement plant in Davao del Norte. The project is scheduled to be operational by 2026. Cement from the plant will be marketed under the Union Cement brand. The sums involved suggest a grinding plant but PHINMA’s cement division, Philcement Corporation, is involved with both manufacture and importation. PHINMA also signed a deal to buy Petra Cement in May 2024. The latter company runs a 0.5Mt/yr cement grinding plant in Zamboanga del Norte. PHINMA re-entered the cement market in the late 2010s when it bought the Union Cement brand and built a cement processing plant at Mariveles, Bataan in 2020.
The battles between cement producers and importers continue to play out in the Philippines as the country’s infrastructure plans gather pace. Yet the balance seems to be tilting more towards the favour of the local manufacturers at the moment, as new capacity gets proposed and built. Anti-dumping duties on imports, particularly those from Vietnam, have now been followed up with local procurement rules in the guise of the Tatak Pinoy Act. Whether this is enough remains to be seen. This kind of environment and the departure of Cemex may also start to revive questions about whether any other foreign-owned cement companies might be considering their options too.
Update on China, April 2024
03 April 2024We turn to look at the Chinese cement sector now that the larger China-based cement producers have released their financial results for 2023. In summary, national output of cement has continued to fall and many of the bigger companies are reporting weakening sales and profits. Yet this trend appears to be slowing, with a few of the producers managing to grow revenue, profits and sales volumes.
Graph 1: Cement output in China, 2018 to 2023. Source: National Bureau of Statistics of China.
Data from the National Bureau of Statistics of China shows that cement output fell by 4.5% year-on-year from 2.11Bnt in 2022 to 2.02Bnt in 2023. This is a slower rate of decline than the 10.4% drop reported between 2021 and 2022. However, it is worth noting that the rate of decrease in output on a half-year basis fell strongly in the first half of 2023 but remained similar in the second half of the year. In its commentary, the China Cement Association (CCA) said that the country’s real estate development investment fell by 10% year-on-year to US$1.53tn.
Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports.
Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.
Unlike in 2022 the two graphs above show that not every cement producer has lost revenue or sales volumes of cement in 2023. CNBM chair Zhou Yuxian used the phrase ‘storms and challenges’ to describe the situation faced by the world’s largest cement company. He left president Wei Rushan to deliver the bad news that the cement industry as a whole faced “insufficient demand, weakening expectations and weakening off-peak season characteristics” along with surpluses and high costs. He said that the cement sector in China saw its profit fall by 50% to US$4.42bn in 2023, its lowest figure since the mid-2000s.
In comparison CNBM Group’s revenue fell by 10% year-on-year to US$29bn and profit by 52% to US$534m. This was principally due to losses from the group’s basic building materials division, the section that makes heavy building materials, including cement. Alongside this, it pushed on with its supply-side structural reforms, implemented staggered peak production and worked on sustainability initiatives. These included preparations for the national carbon emissions trading scheme. Anhui Conch’s results showed that it managed to increase its revenue but its sales volumes of cement dropped and its profits fell by 33% to US$1.48bn. It achieved the boost in revenue by growing its trading business.
Of the smaller companies covered here, only Huaxin Cement managed to grow its revenue in 2023. It appeared to pull this off by growing its concrete and aggregate business domestically whilst growing the business overseas at the same time. The share of its international business grew to 16% in 2023 from 13% in 2022. Major overseas acquisitions in 2023 included Oman Cement and InterCement’s subsidiaries in Mozambique and South Africa. More recently Huaxin Cement has also been reported by local media as the preferential bidder for InterCement’s business in Brazil, although no formal announcement has been made. Of the rest, Tangshan Jidong Cement, CRBMT and China Tianrui all reported declines in sales revenue and profits. Tangshan Jidong Cement did manage to grow its cement sales volumes, but reported heightened competition in the north and north-east of China where most of its plants are located.
With the first quarter results for 2024 on the way soon, the CCA has been bracing itself and the sector for more bad news. It noted that national cement prices during the last week of March 2024 were about 1% lower than during the same week in 2023. Prices were lower in East, Central and South China, although they had increased in Chengdu and Sichuan. The CCA is worried that a price war, either nationally or regionally, will make a bad situation worse. It has called on cement producers to accept that the slowdown of infrastructure development in the country has led to a decline in cement demand and that this is the new normal. Apart from the usual watchwords of ‘self-discipline,’ ‘overcapacity reduction’ and ‘supply-side reforms’ the association has suggested that cement companies look for growth internationally and look to the leadership of associations to help everyone adapt to the new market situation. China’s sales output of cement may be starting to stabilise, but the market has a way to go yet to adapt to the new reality.
China: Anhui Conch Cement's turnover was US$19.6bn in 2023, up by 6.8% year-on-year from 2022 levels. Sales of 42.5 grade cement contributed US$8.46bn (43% of turnover), down by 12% year-on-year. Meanwhile, sales of commercial concrete grew by 25% to US$313m (1.6% of turnover). Overall, the producer’s net profit fell by 33% to US$1.48bn.
Anhui Conch Cement commenced a share buyback programme for up to US$83m-worth of its listed stock in November 2023. At the end of the year, it had repurchased 0.3% of its shares.
Anhui Conch Cement to acquire Conch IT Engineering
18 December 2023China: Anhui Conch Cement has concluded a deal to acquire equipment and software supplier Conch IT Engineering outright. Reuters has reported the value of the deal as US$18m.
Anhui Conch Cement to buy back up to US$82.5m-worth of shares
06 November 2023China: Anhui Conch Cement plans to conduct a share buyback to repurchase up to US$82.5m-worth of its shares. Dow Jones Institutional News has reported that the group will finance the buyback using its internal funds.
China: Anhui Conch has nominated He Chengfa as the chair of its Supervisory Committee in anticipation of the retirement of Wu Xiaoming. His nomination will be submitted to the company’s shareholders at a future extraordinary general meeting. The Supervisory Committee is the monitoring body of the company, accountable to the shareholders at its general meetings.
He Chengfa, aged 57 years, is a senior engineer. He graduated from Wuhan Industrial University specialising in mechanical design and manufacturing and joined Anhui Conch in 1990. Notable positions he has held include that of deputy engineer-in-chief of the Ningguo cement plant, head of the equipment department and deputy general manager of the company. He is currently a deputy general manager, executive deputy officer of the technology centre of Anhui Conch Holdings Company, a director and executive deputy general manager of Santan (Anhui) Institute of Science and Technology and chair of the board of directors of Anhui Conch Construction Materials Design Institute.
Update on China, August 2023
30 August 2023The first half of 2023 has continued to be a tough period for the major China-based cement producers, with revenue and profits down for many. As CNBM put it, the sector is facing production overcapacity, weak demand, high inventory, low prices and declining profits. However, not every company has followed this trend, with a few such as Anhui Conch, Huaxin Cement and Tapai Group managing to hold operating income up and the latter somehow even managing to increase its net profit. The China Cement Association (CCA) in its financial coverage has memorably described these companies that have bucked the national picture as ‘dark horses.’
Graph 1: Sales revenue from selected Chinese cement producers. Source: Company financial reports. Note: For CNBM, cement revenue shown only.
Graph 1 above summarises the situation for a selected group of cement producers. Anhui Conch avoided the fate of CNBM by managing to grow its non-cement revenue, specifically from aggregates and concrete. Yet it too was unble to avoid its net profit falling by 32% year-on-year to US$928m in the first half of 2023 from US$1.37bn in the same period in 2022. Huaxin Cement pulled off the same trick by raising its concrete and aggregates revenue domestically and by growing its overseas revenue. As well as its subsidiaries in Africa, the company also added Oman Cement to its portfolio, completing the acquisition of a majority stake in April 2023. The CCA has a wider roundup of how well the local cement companies have done.
Graph 2: Cement output in China, 2019 to first half of 2023. Source: National Bureau of Statistics of China.
Data from the National Bureau of Statistics of China suggests that the cement sector is stagnating rather than actively declining. This is an improvement of sorts from the decline in the first half of 2022, at least. Cement output in the first half of 2023 rose ever so slightly to 980Mt from 979Mt in the same period in 2022. On a rolling annual basis cement output has been gently falling below 1% each month since November 2022, although it rose by nearly 1% in March 2023.
The underlying problem for the Chinese cement sector remains the local real estate market. Developer Country Garden has been the latest company to warn of potential losses – of up to US$7.6bn – in the first half of 2023. It is also currently attempting to ask for more time to repay a bond. This follows the financial problems that Evergrande has faced since 2021. Financial analysts have been monitoring the situation for several years and warning of what a larger collapse in the sector could mean for the wider economy, such as the implications for the banks that hold the debts of the developers. Commentary by Goldman Sachs in August 2023, for example, suggested that the real estate sector needs to manage its inventory on a large scale, with over US$2Tn in liquidations, in order to restructure debts in the property sector. It estimated that the whole situation could reduce the country’s entire gross domestic product (GDP) by 1.5% in 2023, although this would be the trough of the downturn in its view.
Cement producers in China continue to be held hostage by the conditions in the real estate market and the effect this has in turn on demand for building materials. Yet all is not lost, as the examples of the CCA’s ‘dark horses’ show, buoyed by business diversification, overseas expansion or even regional differences. How much longer the rest of the other cement companies can cope in this environment remains to be seen. A less regulated market would certainly expect to see mergers and acquisitions taking place as the financial pressure mounts. China, for now at least, remains steadfastly different. With luck the real estate market may reach its lowest point in 2023 and a recovery could follow.
China: Anhui Conch grew its concrete and aggregate sales in the first half of 2023 to increase overall sales. Its revenue grew by 16% year-on-year to US$8.99bn in the first half of 2023 from US$7.73bn in the same period in 2022. However, its cement and clinker sales fell by 7% to US$6bn from US$6.46bn. Sales revenue fell in all of its domestic sales regions, although they rose overseas. By contrast, sales and trading of other products more than doubled to US$2.7bn. The group’s sales volumes of cement and clinker increased by 3% to 134Mt. Its total profit fell by 32% to US$928m from US$1.37bn.
In its interim results the company said that it had “actively responded to the complicated and difficult industry situation and strived to overcome the impact of unfavourable factors such as declining real estate investment, sluggish market demand and intensified industry competition.”
Uzbekistan: Anhui Conch Cement inaugurated its new 2.3Mt/yr Tashkent cement plant at Kiziloy on 21 August 2023. The plant cost US$320m and will produce 30% of its cement for export. UzReport News has reported that the plant will directly employ 300 people.
Anhui Conch Cement tenders for coal supply bids
22 August 2023China: Anhui Conch Cement is seeking coal suppliers for two of its subsidiaries. The producer has tendered for bids for contracts to supply 410,000t of bituminous coal, high-sulphur coal and lignite to Naiman Banner Hongji Cement and 10,000t of lignite to Chifeng Conch. Online bidding will open on 25 August 2023 and close on 27 August 2023.