Displaying items by tag: Anhui Conch

China: Anhui Conch and six partners have agreed to establish a partnership fund. The cement producer informed the Hong Kong Exchange that it will directly contribute US$211m into the fund. Securities firm Haitong Capital will provide fund management services as executive partner.

The Chinese cement sector had a tough time in 2022. This was confirmed this week as the large domestic cement producers released their financial results. Revenue was down, profits fell and cement sales volumes tumbled. The key causes included the continuation of the country’s zero-coronavirus policy, the declining real estate market and rising input costs for raw materials such as coal. Demand for cement withered and so did the fortunes of the cement companies.

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China.

Data from the National Bureau of Statistics of China shows that cement output fell by 9.8% year-on-year to 2.13Bnt in 2022 from 2.36Bnt in 2021. The greater decrease was in the first half of the year rather than the second. The China Cement Association (CCA) said that this was nearly the lowest output in the last decade and the largest decline since 1969 ! The National Bureau of Statistics of China also pointed out in a release that, despite investment in fixed assets increasing by around 5% in 2022 and national infrastructure spending growing by 9%, real estate development investment dropped by 10% to US$1.46Tn.

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.

The cement producers warned in their forecasts that the results for 2022 were going to be rough and so it came to pass. China National Building Material (CNBM)’s revenue fell by 16% year-on-year to US$33.4bn in 2022 and Anhui Conch’s sales fell by 21% to US$19.2bn in 2022. Although, Tangshang Jidong Cement and Huaxin Cement reported declines of income or revenue in single digits. Profits halved for all of the companies covered here. Various combinations of the reasons covered above were cited for the situation.

What is more interesting are the responses some of the producers are making and what has gone well. CNBM, for example, is pinning its hopes on better staggered peak production and infrastructure projects. Anhui Conch, meanwhile, appears to have been diversifying its business by increasing both its concrete and solar power production capacity significantly in 2022. It was also announced that it plans to spend US$2.81bn on capital expenditure projects in 2023. China Resources Cement (CRC) said it had optimised its presence in South China through selected acquisition and divestments. Huaxin Cement has continued its focus on overseas markets with its share of operating revenue originating from outside China rising to 13% of the group’s total in 2022 compared to 8% in 2021. It also mentioned a number of unnamed projects around the world steadily drawing nearer to action. Sure enough, the group announced earlier in March 2023 that it was buying a majority stake in Oman Cement.

As for 2023, the CCA forecast in January 2023 that cement demand would be flat or slightly down. However, at the same time, provincial changes to the real estate market are expected to improve market conditions and infrastructure development will further drive demand for cement. The CCA identified that the cement sector’s production overcapacity could become an issue with lower demand. In 2022 the national clinker production utilisation rate was 65%, a fall of 10% from that in 2021. It also pointed out that peak-staggered production had actually helped cement producers generally to cope with smaller declines in profits compared to less well regulated industries.

Problems such as the zero-coronavirus policy, the real estate market and rising raw material costs have made the country’s production overcapacity issue worse. Changes are being made such as the national abandonment of the coronavirus lockdowns in late 2022, and, as mentioned above, the real estate market is being modified. In addition to this, various environmental changes are on the way, as the government works towards its sustainability goals. The country remains the largest cement producer in the world. Yet the message here is that we should expect more of the same for the cement sector in China in 2023.

China: Anhui Conch’s sales fell by 21% year-on-year to US$19.2bn in 2022 from US$24.4bn in 2021. Its net profit dropped by 52% to US$2.31bn from US$4.84bn. Sales volumes of cement and clinker decreased by 24% to 310Mt. It blamed the situation on weakening market demand and high energy costs.

New projects that started operation in 2022 included a capacity replacement scheme at its Anhui Chizhou Conch Cement subsidiary and two new clinker production lines at the Qarshi project in Uzbekistan. The group also completed its acquisition of Chongqing Duoji Renewable Resources, Naimanqi Hongji Cement and Chifeng Hahe Cement. By the end of 2022 its cement and concrete production capacities rose by 1% to 269Mt and 73% to 25.5Mm³. Its solar power capacity also more than doubled to 475MW.

China: Anhui Conch Cement plans to invest US$2.81bn in capital expenditure (CAPEX) throughout 2023. The investments will go towards building new capacity, upgrading to new technologies and increasing plants' energy efficiency. The Morning Star newspaper has reported that the producer currently faces high energy costs, against a backdrop of reduced cement demand.

Anhui Conch Cement recorded sales of US$19.2bn in 2022, down by 21% year-on-year from US$24.4n in 2021.

China/Uzbekistan: Anhui Conch has released an update on some of its major development projects. Its new plant at Tashkent in Uzbekistan has an investment of around US$260m. The company reports that 30,000m² of equipment and materials have arrived, the rotary kiln supporting wheels have been hoisted in place, the main body installation of the coal mill has been completed, the structure of the dormitory building has been capped and the main factory area has begun to take shape. It is also building a plant at Brakbash District in Andijan State. Civil engineering and main engineering construction are reportedly underway. The company also has a third cement plant in the country. So far the group has built over 10 cement plants outside of China.

In China, Anhui Conch is building a CO₂ energy storage demonstration project at its Baimashan cement plant in Wuhu, Anhui province. The group says that, once complete, the project will be the world's first commercial demonstration project of a CO₂ energy storage system. It says that during the low power consumption period, the excess power will be used to compress CO₂ at normal temperature and pressure into a liquid. The heat energy generated during the compression process will be stored. The stored heat energy will then be used to heat the liquid CO₂ back into a gas, driving the turbine to generate electricity, reducing the cost of electricity. The demonstration project has an area of 40,000m².

The cement producer says it is working towards a model of ‘one base and five industries’ where cement production links to other industries such as new energy, new materials, environmental protection, the digital economy and the promotion of international trade.

China: Anhui Conch Cement has reported a provisional net profit of US$2.07 - 2.46bn. Dow Jones Institutional News has reported that this would correspond to a decline of 50 - 58% year-on-year from 2021 levels.

China: Anhui Conch Cement's carbon capture systems went on display at the Macao International Environment Forum and Exhibition in Macao Special Administrative Region on 9 December 2022. Anhui Conch Cement previously installed amine-based carbon capture systems at some of its cement plants, beginning with the Baimashan cement plant in Wuhu, Anhui Province. The producer said that it hopes to introduce its advanced equipment to the international community and to collaborate with other cement companies for the accelerated development of green technologies.

The Macao International Environment Forum and Exhibition addresses China's Dual Carbon Goal of peak national CO₂ emissions before 2030 and carbon neutrality by 2060.

China: Anhui Conch Cement recorded revenues of US$11.7bn during the first nine months of 2022, down by 30% year-on-year from US$16.7bn during the same period in 2021. The group's income declined by 45% to US$1.7bn from US$3.08bn.

The larger cement producers in China have published their half-year financial results and the numbers are looking grim. Starting with data from the National Bureau of Statistics of China, cement output in the country fell by 14.5% year-on-year to 979Mt in the first half of 2022 from 1.14Bnt in the same period in 2021. This is the lowest first half output figure since 2012. The decline on a monthly basis started in May 2021 and has carried on consistently since then. Rolling cumulative annual output hit a low of 2.18Bnt in July 2022, the lowest figure since at least the start of 2019 and well before the coronavirus pandemic started.

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China.

The financial figures from the cement producers have mostly followed this trend. Of the companies covered here, Anhui Conch’s drop in sales revenue was the most distinct at 30% year-on-year to US$8.14bn. However, Jidong Cement actually managed to increase its revenue and Huaxin Cement’s decrease was fairly small, possibly due to its growing stable of overseas projects. None of these companies could avoid falling cement and clinkers sales volumes though. Again, Anhui Conch is the outlier here with a larger fall in sales volumes proportionally at nearly 40% compared to around 20% for the rest. Chen Bolin, the deputy secretary-general of China Cement Association (CCA), told the 21st Century Business Herald newspaper that of the 20 or so listed cement companies that have published their half-year reports by the end of August 2022, more than half had reported falling sales revenue and net profit and only one company had managed to increase its net profit.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports. Note: Cement revenue shown only for CNBM & Taiwan Cement.

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.

The financial reports from the Chinese cement companies detailed here have been fairly light on the reasons for the current state of the sector. Repeated coronavirus outbreaks, instability in the real estate market, a lack of funding for infrastructure projects, growing energy and raw materials costs, pressure on prices and a generally weak economy have all been blamed for the situation. Media channels outside of China have continued to scan the country’s real estate sector for signs of collapse following Evergrande’s problems in 2021. However Chen Bolin diplomatically held back by describing the real estate market as not yet stabilised and a drag on cement demand. Instead he hoped that large-scale infrastructure projects would offer some form of relief.

One last point to note, that both the CCA has made and could be seen in some of the company reports, is that some of the Chinese cement companies are already starting to diversify their businesses. This is in parallel to what some of the larger western-based multinational cement producers have also been doing in recent years with forays into concrete, light building materials and construction chemicals. CNBM already has large concrete, light building materials and engineering subsidiaries. However, Huaxin Cement and Anhui Conch have also started to branch out recently into aggregates, concrete and new energy generation, in the case of the latter company. Things may get worse before they get better, especially depending when or if the Chinese government decides to act on the real estate market. However, whatever kind of adjustment the cement sector may face, there are some signs present already of what some of the companies may do next.

China: Anhui Conch’s operating revenue fell by 30% year-on-year to US$8.14bn in the first half of 2022 from US$11.6bn in the same period in 2021. Its net profit dropped by 33% to US$1.44bn from US$2.17bn. Its overall sales volumes of cement and clinker decreased by 37% to 130Mt. By region the group reported its biggest drop in sales volumes in East China. Anhui Conch blamed its falling sales and profit on continued coronavirus control measures, falling market demand and rising energy prices.