Displaying items by tag: China

Many first quarter financial results for cement producers are out already and what can be seen so far deserves discussion. The first observation is that the sales revenues of Chinese companies have suffered compared to their international peers. As can be seen in Graph 1 (below) CNBM increased its sales slightly in the first quarter of 2022 but Anhui Conch and China Resources Cement (CRC) had significant falls. Stronger results from CNBM’s non-cement production subsidiaries released so far suggest that the parent company’s slow performance is likely due to the cement market. The China Cement Association has reported that national cement output dropped by 12% year-on-year to 387Mt in the first quarter of 2022. It blamed this on the latest local coronavirus wave, limited construction project funds and poor weather.

Graph 1: Sales revenues in the first quarter of 2022 from selected cement producers. Source: Company financial reports. Note: SCG data is for its building materials division only.

Outside of China sales revenue growth has been better with Holcim and Dangote Cement leading the companies presented here. Holcim attributed its success to “strong demand, acquisitions and pricing”. Demand and pricing have been familiar refrains in many of the results reports this quarter. The undertone though has been the destabilising effects upon energy prices by the ongoing war in Ukraine. Holcim’s head Jan Jenisch summed it up as navigating “challenging times, from the pandemic to geopolitical uncertainty.” The producers with operations in the Americas and Europe seem to have coped with this so far mostly due to resurgent markets. Quarterly sales revenue growth for Holcim, CRH (not shown in the graphs) and Cemex each exceeded 10% year-on-year in both of these regions.

The regionally focused companies presented here have suffered more. India-based UltraTech Cement said that its energy costs grew by 48%, with prices of petcoke and coal doubling during the period. Nigeria-based Dangote Cement reported that its group sales volumes were down 3.6% mainly due to energy supply challenges in Nigeria. Internationally, its operations relying on cement and clinker imports – in Ghana, Sierra-Leone and Cameroon – were also hit by high freight rates caused by global supply chain issues. Thailand-based SCG said that national demand for cement demand fell by 3% due to negative geopolitical effects causing inflation, a delay to the recovery of tourism and a generally subdued market.

Graph 2: Cement sales volumes in the first quarter of 2022 from selected cement producers. Source: Company financial reports.

It’s too early to read much into it but one final point is worth considering from cement sales volumes in the first quarter of 2022. They have appeared to fall for the companies that have actually released the data. The reasons for CRC in China and Dangote Cement in Sub-Saharan Africa have been covered above. Holcim’s volume decline was 2% on a like-for-like basis and the others were all very small changes.

To summarise, it’s been a good quarter for those cement producers covered here with operations in North American and Europe. Energy instability caused by the war in Ukraine so far seems to have been passed on to consumers through higher prices with no apparent ill effect. The regional producers have suffered more, with the Chinese ones having to cope with falling demand and the others finding it harder to absorb mounting energy costs and supply chain issues. Plenty more first quarter results are due from other cement companies in the next few days and weeks and it will be interesting to see whether these trends hold or if others are taking place.

China: CNBM’s total operating revenue fell by 1% year-on-year to US$7.29bn in the first quarter of 2022 from US$7.254bn in the same period in 2021. Its operating costs grew by 3% to US$6.90bn. Its net profit fell by 9% to US$420m from US$462m.

China: Anhui Conch’s revenue fell by 26% year-on-year to US$3.85bn in the first quarter of 2022 from US$5.21bn in the same period in 2021. Its net profit fell by 14% to US$773m from US$900m. However, its operating costs fell by 29% to US$2.96bn from US$4.16bn.

China: China Resources Cement’s (CRC) turnover fell by 18% year-on-year to US$889m in the first quarter of 2022 from US$1.08bn in the same period in 2021. Its sales volumes of cement, clinker and concrete decreased by 34%, 12% and 23% respectively to 12.2Mt, 0.78Mt and 2.22Mm³ respectively. Its profit dropped by 43% to US$92.9m from US$164m.

China: Cement output fell by 12% year-on-year to 387Mt in the first quarter of 2022. Data from the Ministry of Industry and Information Technology also shows that cement output volumes fell by 5.6% year-on-year to 187Mt in March 2022, according to the Xinhua News Agency. The China Cement Association has blamed this on the latest local coronavirus wave, limited construction project funds and poor weather.

China: Xinjiang Tianshan Cement, a subsidiary of Chizhou CNBM New Materials, has acquired mining rights for the Hengshan mining area and peripheral mines in Chizhou City’s Guichi District in Anhui province for US$376m. Reuters has reported that the company plans to make a total investment of US$1.38bn in establishing its mining operations there. The mines have limestone reserves of 513Mt and will be operational until 2043.

China: Gansu Qilianshan Cement plans to restructure its business. The group says that, should it proceed with its proposed restructuring, it will issue shares. Reuters News has reported that the restructuring may constitute a material asset restructuring.

Namibia: Immigration authorities have deported eight illegal Whale Rock Cement workers back to China. The Namibia Press Agency has reported that a court sentenced the Chinese nationals to deportation and fined them US$403 each.

Whale Rock Cement has reportedly launched its own legal action against vigilante workers’ rights group Namibia Economic Freedom Fighters (NEFF), which uncovered the illegal practices, for trespassing.

China: Tangshan Jidong Cement’s consolidated net income was US$779m in the first quarter of 2022, down by 2.5% year-on-year from US$799m in the first quarter of 2021. The decline contributed to a widening in the group’s net loss to US$36.6m, more than four times its 2021 first-quarter loss of US$8.07m.

Namibia: Immigration authorities have apprehended eight Chinese employees of Whale Rock Cement at the company’s Otjiwarongo grinding plant who failed to produce working permits during an inspection. Namibian Press Agency News has reported that seven of the workers have been in Namibia since mid-2021, while the eighth arrived in March 2022.