Steady gains for pipe producer

PUBLISHED : Monday, 29 August, 2011, 12:00am
UPDATED : Monday, 29 August, 2011, 12:00am


Hong Kong-listed China Liansu Group Holdings, a mainland-based plastic pipes and fittings manufacturer, announced a steady interim financial result for the six months ended June 30.

The group's revenue grew at a healthy pace to 4.57 billion yuan (HK$5.58 billion), representing an increase of 37.4 per cent over the same period the previous year.

Profit attributable to owners of the company was 536 million yuan, representing an increase of 11 per cent over the same period the previous year. Basic earnings per share were 18 fen (22 HK cents).

The company, based in Shunde, in Guangdong, says that its financial result was boosted by the central government's focus on housing development. Sales were driven up by the increased investment in housing and water conservancy infrastructure and the group increased its production capacity to cope with the vast demand from customers which drove up sales. As a result the company recorded a steady growth in its revenue.

Chairman Wong Luenhei says China Liansu will benefit with the housing policies of the central government.

'In order to maintain the steady development of [the] domestic economy, the government continued to introduce measures to expand domestic demand despite the uncertainties in the global economy.

'The government strived to improve people's living and implemented rural urbanisation, water conservancy reform and affordable housing construction given the relatively high inflation level in the first half of 2011. Such expansion has created huge opportunities for the development of the plastic pipe industry. 'Grasping these opportunities, the group continued to expand production scale, enhance and refine the sales network to improve its competitiveness and strengthen its market position.'

Leveraging on the industry leading position, the group enjoyed economies of scale to maintain a gross margin at a healthy 23.7 per cent despite rising raw material prices.

The southern China region is still a key market of the company. At the same time, the group has actively expanded its sales network in other regions, which has led to satisfactory results in the first half of the year.

As at June 30, the group had 980 independent distributors serving customers throughout China. During this period, southern China accounted for 68.1 per cent of total sales, while southwestern and central China accounted for 9 per cent and 8.1 per cent respectively.

The group has 13 operating production bases for plastic pipes and pipe fittings, which are strategically located on the mainland, effectively covering its nationwide sales network and close to target markets and potential customers, thereby reducing transportation costs.

In order to meet increasing market demand, the group has implemented plans to expand production capacity. The production bases in Changchun and Urumqi were completed for operation in the second quarter of this year and the fourth quarter of last year respectively.

The Shaanxi production base is under construction to boost the group's presence in the region and is expected to be completed for operation midway through next year.

Wong says: 'As a leading manufacturer in the plastic pipe industry, the company is confident about its healthy and stable business development for the second half of 2011, despite uncertainties in the industry spurred by current economic conditions.

'With its own strengths, the group will improve its overall competitiveness by expanding the nationwide sales network and refining the market, optimising production capacity and enhancing research and development capability to strengthen the group's position in the industry and create added-value for investors.'