Cement giant sees slower demand

PUBLISHED : Tuesday, 05 April, 2011, 12:00am
UPDATED : Tuesday, 05 April, 2011, 12:00am


Domestic demand for cement would gradually slow down from double to single digits, said the president of China National Building Material (CNBM), the country's biggest cement producer.

The mainland's cement demand is expected to grow 8 per cent next year, Thomas Cao Jianglin said. Demand was expected to rise 12 per cent to 2.1 billion tonnes this year, after climbing 15.5 per cent to 1.87 billion tonnes last year, the China Cement Association said.

'In future, China's cement demand can no longer have double-digit growth. Its growth must slow,' CNBM chairman Song Zhiping said.

However, the central government plans to build 10 million flats for this year for low-income earners, Song said. 'This will drive the Chinese cement industry and boost our sales. Low-cost housing also uses new building material, so it will benefit our sales of new building materials.'

Cement accounted for 73 per cent of CNBM's revenue last year, while lightweight building material accounted for 8.4 per cent and glass fibre 5.5 per cent.

This year, the Hong Kong-listed company's capital expenditure would be 16 billion yuan (HK$18.9 billion), of which 14 billion yuan would be used to boost production capacity, said Cao. Last year, capital expenditure was at 16.3 billion yuan.

Song said CNBM would raise annual production from 200 million tonnes to 250 million tonnes. In 2009, annual output was 160 million tonnes in 2009. CNBM overtook Anhui Conch as China's biggest cement producer last year. The state-owned firm plans to increase its annual production to 300 million tonnes by 2015, said Nick Lai in a JP Morgan report.

CNBM planned to issue 10 billion yuan worth of bonds this year to reduce financing costs, said Cao. 'We must improve our gearing.'

Its net debt to equity ratio fell from 212.2 per cent at the end of 2009 to 183.3 per cent at the end of last year, Cao disclosed. 'If we're lucky, we hope to bring our gearing down to 150 per cent by the end of this year.'

Last year, CNBM's turnover soared 56.1 per cent to 51.99 billion yuan, while net profit rose 43.2 per cent to 3.37 billion yuan. CNBM's 2010 turnover was 23 per cent higher than JP Morgan's forecast of 42 billion yuan and higher than the consensus estimate of 46 billion yuan, wrote Lai. Its 2010 net profit of 3.37 billion yuan was slightly above the consensus estimate.