Displaying items by tag: Anhui Conch

China: Anhui Conch Cement, the biggest cement producer in Asia by output, has announced that its net profit fell by 45.6% to US$1.03bn in 2012 from US$1.87bn in 2011. The drop was attributed to a decline in the price of cement and a general slowdown in the growth of cement market demand in 2012.

Operating revenue for the company dropped by 6.41% year-on-year to US$7.25bn in 2012 from US$7.83bn in 2011. By market region, Anhui Conch's East China region saw sales fall by 15% in 2012 to US$2.58bn. Its Central China region fell by 19% to US$1.97bn. Its South China region fell by 2% to US$1.39bn, its West China region rose by 59% to US$1.08bn and exports rose by 40% to US$223m.

In 2012 the company sold 187Mt of clinker and cement in 2012, a year-on-year growth of 18.3%. The cement producer added 20.8Mt of clinker production capacity and 28.3Mt of cement production capacity in 2012. At the end of 2012, the group's clinker production capacity and cement production capacity amounted to 184Mt and 209Mt respectively, with a total residual heat electricity generating capacity of 881MW. During 2012 the group also began its first overseas investment project with the start of construction of PT Conch South Kalimantan Cement in Indonesia, with a clinker production line of 3200t/day.

For 2013 Anhui Conch expects 'excessive' production capacity and structural adjustment in the cement industry to continue. However demand will remain stable and government pressure to increase environmental regulations and encourage industry consolidation should benefit the group. The group expects to increase its clinker and cement production capacity by 15.4Mt and 22.5Mt respectively in 2013. For its three major risks for 2013 the group included a volatile construction industry, fuel costs and the risks of further government environmental regulation.

Liu Ming of the National Development and Reform Commission (NDRC) once again stated the obvious this week: China is producing too much cement.

He made the same warning on overcapacity that has been made all year. Officials from the NDRC have recommended stricter controls on new capacity, faster mergers and acquisitions, elimination of out-dated capacity and faster industry upgrades. Unsurprisingly this is exactly the line that China's Ministry of Industry and Information Technology (MIIT) was hawking in its 12th Five-year Plan (2011-2015) for the country's building materials industry that it released back in 2011.

So what's actually happened since last time Liu Ming played Cassandra?

Back in July 2012, at the time of the half-year financial reports, it looked like Chinese cement producers were facing profit gaps of around 50%. Now it looks worse. Major producer China National Building Material Co (CNBM) has reported a drop in net profit of 40% to US$575m for the nine months to 30 September 2012. Anhui Conch has reported a drop in net profit of 57% to US$632m. China National Materials Co Ltd (Sinoma) has reported a 76% drop in net profit to US$48.8m for the same period. Jidong Cement reported a 83% drop in net profit to US$38.6m.

In 2010 Chinese cement production was 1.87Bt. In 2011 it was 2.06Bt, according to Chinese state-released statistics. From January to September 2012, the country produced 1.59Bt of cement, a year-on-year increase of 6.7%. For the full year of 2012 it is estimated that China will produce 2.8Bt/yr. However, according to the NDRC production growth have fallen to 6.7% in 2012 compared to 11.4% in 2011. Capacity is still rising whilst profits are plummeting.

At the start of 2012 the Chinese Vice Minister of Environment Protection, Zhang Lijun, announced that the ministry plans to introduce stricter rules on NOx emissions from cement plants. At the time it was reckoned that the move could wipe out a third of the industry's total net profits. Then in September 2012, industry reports suggested that the government was now going to set nitrogen oxide emissions to 300mg/m3, below the international standard of 400mg/m3. It was estimated that only about a third of producers would be able to afford the necessary upgraded equipment to meet the requirement. Then, also in September 2012, the Guangdong Emissions Trading Scheme (GETS) was launched, which might offer another way of restraining production.

In summary: profits are tumbling, production is probably slowing and new controls are as-yet unbinding. Yet, perhaps Liu Ming repeated his warning for one particular audience who can make a difference. On 8 November 2012 the Chinese Communist Party holds its 18th national congress to decide the new leadership. Producers like West China Cement are certainly hoping this shakes things up. It recently announced that it was waiting for new infrastructure projects to be approved to swallow up its growing surplus.

Indonesia: Chinese producers are expected to increase their capacity in Indonesia to 65Mt/yr from 60.56Mt/yr, according to an Indonesian industry official.

"Production will increase by 7% because the capacity of the factories will be ramped up and there will be additional investment in the cement business as well," said Director General for Basic Manufacturing Industry, Panggah Susanto. The plans for investment have been approved by the Capital Investment Coordinating Board (BKPM).

Chinese producer Anhui Conch Cement Co Ltd has said that it will will build a 10Mt/yr plant in either South Kalimantan, East Kalimantan, West Kalimantan or West Papua.

China Trio Bit Engineering Co Ltd will build a 1.5Mt/yr plant in Subang, West Java. Another Chinese firm, State Development and Investment Corperation (SDIC), will build a 1.8Mt/yr plant in Papua. In addition, Siam Cement, the largest cement producer in Thailand, has also expressed interest in building a 1.8Mt.yr plant in West Java.

Cement industry results from China have all told an alarming story this week: profits for the first half of 2012 look set to fall by more than 50% year-on-year.

China Resources Cement Holdings warned that its first-half earnings were down sharply. China National Materials Co. Ltd. (Sinoma), the cement equipment and engineering services provider, and Gansu Qilianshan Cement, a small Shanghai-listed cement producer, have both forecast similar drops. Sinoma blamed its drop in profit partly on an overseas project but 'interestingly' no further information was released detailing which project.

Previous to this in June 2012 Anhui Conch Cement warned that its net profit would fall by more than 50% due to weak demand and falling product prices. In May 2012 China National Building Material Co Ltd (CNBM) reported that its net profit for the first quarter of 2012 was down by 45% year-on-year. In April 2012 Jidong Cement reported an increase in its net loss for the first quarter and a year-on-year revenue drop of 14%.

Each of the Chinese big players in the cement industry have issued profit warnings of a similar scale suggesting that the Chinese market faces a uniform downturn or that a slowdown is being centrally managed. Official signs that the Chinese industry faced a slowdown emerged in March 2012 when the national growth target was lowered, analysts' predictions were released forecasting weakened profits for the nation's main producers and government officials admitted that overcapacity loomed within five years.

According to OneStone Research data on the Chinese market in 2010 CNBM, Anhui Conch, Jidong and Sinoma represented over 20% of Chinese capacity. To give these figures some perspective, in 2011 CNBM's profit was US$1.7bn. Holcim's operating profit for the same period was US$2bn and Lafarge's operating income was US$2.74bn. Even halved, CNBM's profit is a massive figure for a company with less of an international presence than the European multinationals.

China: Analysts expect the profitability of China's leading cement producers to weaken in 2012 due to slowing demand and falling prices.

SWS Research analyst Ye Rong expects the earnings of China's second-biggest cement producer, Anhui Conch Cement, to plummet by half in the first quarter, because the Yangtze River Delta, where most of Anhui Conch's sales are based, has seen cement price drops of 5% to 20% since the Lunar New Year, on 23 January 2012. Citic Securities forecasts the Hong Kong-listed firm's net profit will drop by 40% in the first quarter.

The net profit of Anhui Conch soared by 88.1% to US$1.84bn in 2011, while revenue surged by 41% to US$7.71bn. The state-owned enterprise's results for 2011 were in line with market expectations, wrote Luo Yang in a Nomura report. However, Anhui Conch's profit margin was likely to deteriorate in 2012, due to downward pressure on selling prices, rising costs and decelerating productivity, Luo wrote. "Under severe overcapacity, the company is subject to higher price risk in comparison with most of its peers."

Anhui Conch chairman Guo Wensan said the industry would face unfavourable factors in 2012, such as a slowdown in investment growth, regulation of the real-estate sector and rising energy prices. Anhui Conch plans a capital expenditure of US$1.27bn in 2012 less than the US$1.44bn in 2011.

In an exception to this trend, mainland China's biggest cement producer, China National Building Materials, announced it expected net profit to jump more than 100% from 2011. However, JP Morgan expects prices and profit per tonne for most mainland cement producers in 2012 to be up to 10% lower than 2011, and has trimmed its earning estimates for most listed cement companies. The growth in the mainland's cement consumption would be 5% to 8% in 2012, against 11% in 2011, the China Cement Association said.

The net profit of China National Materials (Sinoma) rose by 32.78% to US$231m in 2011, while turnover grew by 14% to US$8.04bn. The Hong Kong-listed firm's cement sales surged by 40% to US$3.21bn in 2011, while sales of its hi-tech materials increased by 7.7% to US$981m and its cement equipment business dipped by 0.1% to US$3.85bn.

Sinoma's net profit in 2011 was 10% below market consensus and 11% below Nomura's estimate. This was mainly due to much lower top-line growth and a disappointing margin performance. The state-owned firm's biggest business sector, cement equipment, suffered a small drop in 2011, because China's fixed-asset investment in cement fell by 8.3% in 2011, Luo wrote. "We expect it to further decrease by 15% in 2012." Sinoma's cement prices were under significant downward pressure, especially in Xinjiang province, due to worsening overcapacity, Luo warned.

Indonesia: Chinese cement giant Anhui Conch Cement plans to begin construction of a plant in South Kalimantan later in 2012, with an anticipated investment of US$400m.

"The planned plant in South Kalimantan will be able to produce 2.5Mt/yr," announced Industry Minister MS Hidayat as he met with a business delegation from China's Anhui province at the ministry's office. The output will be used for domestic purposes.

Anhui Conch Cement is currently awaiting the completion of its land acquisition process and a license to be issued by the South Kalimantan administration so that the plant can be built in Tanjung, Tabalong. The plant will be equipped with a cement-grinding plant, a seaport, a 60MW power plant and other supporting infrastructure.

Hidayat added that Anhui Conch Cement is also preparing to acquire land in Manokwari, West Papua, in 2013 for another cement plant that would require US$400m. It is expected to meet cement demands in the surrounding areas.

China: On 5 March 2012 Premier Wen Jiabao lowered China's growth target for 2012 to 7.5% from 8%, signalling Beijing's determination to manage a 'soft landing' to moderate its runaway economic expansion. The slowdown will likely hit China's construction sector, which accounts for most of China's rampant cement consumption. China exported only 10.6Mt/yr of cement in 2011, just 1.1% of national output. The worries over China's plans are affecting certainty in all major materials markets.

Credit Suisse described China's more moderate growth target as 'acceptance of slower medium-term growth.' It also said that infrastructure spending was on a downward trend due to the completion of many large highway, railway and airport projects.

Despite this, Guo Wensan the chairman of China's largest cement producer Anhui Conch, has announced that demand for cement remains strong in China. He said that the government's drive to push the construction of subsidised affordable housing is successfully offsetting declining cement demand from the private housing market.

Guo said that cement demand from the 10 million affordable housing units started in 2011 will peak from the second quarter of 2012 onwards. "This year there will be another 7 million public housing starts, so we remain confident," he said. Guo added that the cement industry has benefited from consolidation since the start of 2011, which has seen the removal of older, inefficient kilns and the closure of some companies.

China: China's environment ministry is planning to launch stricter rules regarding nitrogen oxide emissions from cement plants, according to local press. An industry expert said that the policy change could wipe out a third of the industry's total net profits.

The report illustrates the challenges faced by the government to balance pressures for strong economic growth with public demands to lessen pollutants caused by industries that currently operate with few environmental restrictions. China had previously said that it planned to cut the cement industry's overall nitrogen oxide emissions, a key cause of acid rain and photochemical smog, by 10% by 2015.

Chinese Vice Minister of Environment Protection, Zhang Lijun, during a visit to the Anhui Conch Cement Company in January 2012, told accompanying officials and executives that the ministry plans to introduce stricter rules.

Kong Xiangzhong, the president of China's cement industry association, said that the ministry is considering tightening nitrogen oxide emission standards to 400mg/m³ from the current 800mg/m³. "It will translate into huge pressure for the cement industry," Kong was quoted as saying.

China's cement industry, polluting but profitable, has thrived during China's infrastructure spending spree. Anhui Conch, for instance, announced that its 2011 net profit is expected to be at least 80% higher than in 2010. China is the world's largest cement producer, with some 3000 plants producing 2Bt/yr. Beijing announced earlier that it wants to shut at least a third of the country's least efficient cement plants by 2015.

China: Anhui Conch Cement Co Ltd, China's biggest cement producer, plans to add 10Mt/yr of cement production capacity to its annual total by 2015 via overseas expansions. This will include both setting up its own new facilities and acquiring international rivals that are currently weakened by the European debt crisis, according to Wang Jianchao, manager of Anhui Conch's foreign economic cooperation department. Anhui Conch wants to expand its production to other countries because China has restrictions on new cement projects, which aim to combat the industry's overcapacity. The Shanghai-listed company produced 110Mt of cement in China in 2010 according to its annual report.

Jianchao said that the company, which currently has no overseas production, is engaged in a 'go-global' strategy. "Many cement plant owners in the Eurozone want a quick bailout because they need cash to save their businesses, which were hit hard by the European debt crisis," said Wang, adding that the company is moving at the best time to build its overseas operation. He declined to disclose the budget for strategy, but said the company is financially strong enough to expand.

Anhui Conch Cement began its overseas expansion in late June 2011 when it signed a memorandum of understanding to invest USD2.35bn in several Indonesian cement plants. Wang offered no details on the status of the proposed Indonesian projects, but he hinted that the Anhui Conch's first foreign factory may open elsewhere because opportunities in other countries are also being explored.

"Apart from Indonesia, we are in discussions with potential business partners in Mongolia, Central Asia and South America. It's hard to say whether our foreign production will operate in Indonesia first, because other foreign projects may proceed more smoothly," said Wang.

To help its overseas expansion plan go smoothly, Anhui Conch teamed up with the Swedish industrial leader Atlas Copco Group AB to gain access to its cutting-edge mining machinery and training systems. The two companies have a history of cooperation dating to 1993 and the drilling equipment used by Anhui Conch is supplied by Atlas Copco.The Swedish company has a strong customer base in Indonesia.

China: CNBM was China's biggest cement producer in 2010 followed by Anhui Conch and Jidong according to newly-released data from OneStone Research.

In China the top 10 cement producers comprised 817.4Mt/yr (34%) of a cement capacity of 2.41Bnt/yr. The market leader with a capacity of 200Mt/yr (8.3%) was CNBM, followed by Anhui Conch with 150Mt/yr (6.2%) and Jidong with 89Mt/yr (3.7%). Next places in the ranking were taken by Sinoma Cement, Shanshui, Huaxin, CRC, Tianrui, TCC (China) and Hongshi.

Companies in the top 11 – 20 rankings included BBMG, Jinyu Group, Lafarge, Yatai and Asia Cement, combining about 9.5% of China's cement capacity. In total the top 20 companies comprised 43.5% of the national capacity.

The only foreign producer within the top 10 besides Holcim (which hold a 39.9% participation in Huaxin) was Taiwan Cement Corp. (TCC) Other major foreign cement producers in China include Lafarge, CRH, HeidelbergCement, Asia Cement Corp., Taiheiyo, Italcementi, Cimpor and Cemex.