Cement producer records 20pc rise in sales
China Resources Cement Holdings saw sales increase at least 20 per cent last year despite anti-inflation measures by the mainland government, according to vice-chairman and general manager Shi Shanbo.
Based in southern China, the cement maker sold 3.45 million tonnes of cement last year, a 20 per cent rise from 2003, whereas sales of concrete jumped 27 per cent to 1.47 million cubic metres.
Fuelling the demand for the building materials was an estimated 24 per cent increase in fixed asset investments last year and 9.4 per cent economic growth, Mr Shi said.
'Measures to cool inflation also cooled the demand for cement and raised financing costs of smaller cement manufacturers,' Mr Shi said after the company's extraordinary general meeting yesterday.
'However, bigger players are more resilient to the measures and benefited from them to some extent.'
He added that demand for cement and concrete would remain strong this year due to the country's forecast of 15.1 per cent growth in fixed asset investment and 8 per cent expansion in its gross domestic product.
For the first 11 months of last year, the mainland produced 850 million tonnes of cement, which was 15.5 per cent higher than the same period in 2003, Mr Shi said.
The healthy consumption rate, which saw 98.3 per cent of the output in the first three quarters last year sold, would continue this year, he added.
However, the biggest challenges to cement manufacturers this year would be management of coal and electricity costs as shortages of the energy sources continued to affect operating costs and margins, he said.
'We managed to limit the increase of our operating cost at 3 per cent last year, much below the market average of an 8 per cent increase,' Mr Shi said.
To capitalise on the demand growth, China Resources Cement will see its cement output lifted 57.6 per cent to 5.2 million tonnes this year after minority shareholders yesterday approved a motion to acquire a 73.5 per cent stake in a plant in Pingnan, Guangdong province.
The stake, held by its unlisted parent, China Resources (Holdings), is valued at about $151 million.
The purchase will be funded by an $800 million convertible bond issue.
The issue, on full conversion, would increase the group's net gearing ratio to 89 per cent, a level which Mr Shi said would not hurt the company's ability to raise further funds, if necessary.