Aggressive marketing leads to rise in profit

PUBLISHED : Monday, 04 April, 2011, 12:00am
UPDATED : Monday, 04 April, 2011, 12:00am


Hong Kong-listed cement manufacturer China Shanshui Cement Group announced a steady increase in revenue for 2010 on the back of aggressive marketing strategies adopted last year.

Shanshui, which is the largest cement enterprise in Shandong and Liaoning provinces, says revenue grew by 35.8 per cent year-on-year to 11.85 billion yuan (HK$14.04 billion) for the year ended December 31. Gross profit increased by 43.2 per cent to 2.55 billion yuan and profit attributable to equity holders increased by a healthy 39.6 per cent to 979 million yuan. The basic earnings per share was 35 fen. The board recommended a final dividend of 14.5 HK cents per share.

'We have adopted aggressive marketing strategies to seize the opportunity brought by the government's policy of boosting domestic demand, as well as conserving energy and reducing emissions,' says Zhang Caikui, chairman of Shanshui Cement. 'This has translated into encouraging results in 2010 with sales, revenue and net profit all attaining record highs. We have been expanding our cement production capacity through building new production lines and reorganising acquired enterprises. While we are enlarging our coverage of the cement market in Shandong and Liaoning provinces, our endeavour in establishing market presence in areas such as Inner Mongolia, Shanxi and Xinjiang appears to achieve initial success, thus enabling the group to realise leaping growth.'

Cement sales volume grew by 33.8 per cent to 39.32 million tonnes last year, driven by nationwide demand in infrastructure and property development. Sales revenue from cement rose by 40.4 per cent to 9.27 billion yuan, accounting for 78.2 per cent of the group's total revenue. Sales volume of clinkers, or cinder lumps, increased by 16.9 per cent to 9.84 million tonnes, and its sales revenue increased by 22.9 per cent to 1.94 billion yuan, representing 16.4 per cent of the group's total revenue.

The company's facilities in Shanxi began operation last year and recorded revenue of 6.23 million yuan, with the contribution to the group's overall sales expected to increase. The average selling price of cement in Shandong was 238 yuan per tonne, an increase of 7.5 per cent over 2009. In northeastern China and Shanxi, the price was 226.2 yuan per tonne and 314.9 yuan per tonne respectively.

New production capacity of cement and clinkers, including production lines under trial operation, reached 18.20 million tonnes and 5.76 million tonnes, respectively. Total production capacity stood at 66.54 million tonnes of cement and 30.95 million tonnes of clinkers.

According to geographical location, the group's production capacity in Shandong reached 48.14 million tonnes of cement and 22.05 million tonnes of clinkers, while its capacity in northeastern China reached 17.40 million tonnes of cement and 8.90 million tonnes of clinkers. The capacity of its cement operation in Shanxi reached one million tonnes.

The group has managed to reduce the purchasing cost of raw materials by furthering standard procurement procedures and the use of alternative raw materials through innovation.

Looking ahead, Zhang says: 'This year is the first year of the 12th Five-Year Plan and the central government has clearly stated its intention to build a well-off society, as well as support the construction of affordable homes, water facilities, agricultural infrastructure and public facilities. This has presented valuable growth opportunities rarely seen for us. We, therefore, are making active efforts to perfect our market presence in Shandong and Liaoning provinces, as well as accelerate our expansion in Shanxi, Inner Mongolia and Xinjiang and their surrounding provinces, in order to achieve the goal of increasing cement production capacity to 80 million tonnes by the end of 2011. We also plan to extend our cement business chain to concrete and aggregate production, aiming to create a new growth driver for the group.'

Shanshui Cement ranks among the top three cement producers on the mainland.