Chu Kong on lookout for buys to bulk up sales volumes, products

PUBLISHED : Saturday, 11 June, 2011, 12:00am
UPDATED : Saturday, 11 June, 2011, 12:00am

Chu Kong Petroleum and Natural Gas Steel Pipe Holdings is in talks to acquire rivals or their assets to extend its product line, and aims to finalise the establishment of a joint venture production line in the Middle East to circumvent protectionism there.

The Guangdong maker of oil and gas pipelines was talking with 'two to three' mainland companies about acquiring them or their assets, chairman Chen Chang saidafter the firm's annual shareholders' meeting.

'We want to increase our sales volume and expand our product offerings to applications such as chemicals, infrastructure, bridges and power plants,' he said.

The company was also hoping to finalise talks in the next few months to set up a joint-venture plant with an annual capacity of 300,000 tonnes of steel pipes a year, which may come on stream next year.

The Middle East has no domestic production of longitudinally submerged arc welded (LSAW) pipes, which are Chu Kong's mainstay product, Chen said, adding the countries in the region needed to import them from Europe and China.

Compared with more widely used spiral submerged arc welded (SSAW) pipes, LSAW pipes can withstand higher pressure and are required in densely populated areas for better protection against explosion.

Recent regulations favouring domestic sourcing of LSAW, substantial import tariffs and transport savings meant it made sense for Chu Kong to build a production base in the Middle East, Chen said.

Executive director Lilian Chen Zhaonian expects the firm to post substantially better sales and profit margin this year, after net profit fell 82.5 per cent last year from 2009.

Chu Kong is negotiating potential orders from the Middle East and South America. It has received new orders worth 1.42 billion yuan (HK$1.7 billion) so far this year. Uncompleted orders stood at two billion yuan at last year's end. Sales amounted to 1.68 billion yuan last year.

Meanwhile Shandong-based rival Shengli Oil & Gas Pipe Holdings last week warned its profit would fall substantially in this year's first half.

Shengli cited delays in construction of major national oil and gas pipeline projects due to Beijing's macroeconomic tightening, but said it received 1.46 billion yuan of orders that would be delivered in the second half and beyond.