Hongqiao to boost plant capacity
China Hongqiao Group, which is raising up to HK$17.2 billion in an initial public offering, plans to use more than 80 per cent of the net proceeds to boost production capacity.
The Shandong aluminium products maker is building a new plant and when completed in the first half of next year, it will have the capacity to process 1.83 million tonnes of aluminium a year, against 1.14 million now.
Hongqiao makes and sells molten aluminium alloy, alloy ingots and bus bars.
Last year, the company selected Gaoxin Aluminum & Power as its sole supplier of alumina, the raw material for making aluminium products.
Chief executive Zhang Bo said the company had signed several memorandums of understanding with other suppliers as back-up if Gaoxin was not able to provide enough alumina.
Hongqiao said the average spot price of alumina was about 2,326 yuan (HK$2,750) per tonne for the nine months to September last year, and it paid on average 1,590 yuan per tonne.
The company was keen to tap the downstream market by selling higher-margin products, but it gave no details about future plans.
Zhang also declined to give details about potential acquisition plans of other aluminium product makers.
Hongqiao is selling 1.74 billion shares at an indicative range of HK$7.10 to HK$9.90 per share. Its net profit was 577 million yuan in 2009, up from 284 million yuan in 2008.