BBMG bullish on prices in the north
The cement markets in Beijing, Tianjin and Hebei will do well this year, according to cement maker and property developer BBMG, although analysts say the outlook elsewhere is not so bright.
'This year, cement prices in Hebei, Beijing and Tianjin will not drop, so we are bullish,' said BBMG board secretary Zheng Baojin. The company's cement business is concentrated in Hebei, Beijing and Tianjin in the north.
The Hong Kong-listed firm plans to increase annual cement production capacity to 50 million tonnes by the end of the year, from 45 million tonnes in January, chief financial officer Wang Hongjun said.
Last year, BBMG's cement sales grew 25.5 per cent to 28 million tonnes.
The cutting of excess production capacity last year has tightened cement prices in the north, but cement prices will bottom out, said Ethane Cheng, an analyst with Guosen Securities. 'I'm bullish on northern China this year.'
However, Cheng is negative on other regions, especially the east, where cement prices have been falling. In the first week of March, nationwide average prices fell 0.26 per cent week on week, according to Citic Securities.
BBMG, a state-owned company, said it was targeting 13 billion yuan (HK$15.9 billion) in contracted revenue from its property business this year. Last year, BBMG's property revenue rose 18.9 per cent to 8.28 billion yuan.
The company will invest 4.5 billion yuan in its land bank this year, said vice-president Wang Shizhong.
'If all goes well, our property business will grow this year,' said BBMG chairman Jiang Weiping.
BBMG is the second biggest property developer in Beijing, where it is headquartered. It also has property projects in Chengdu, Chongqing and Hangzhou.
Despite fears of a shakeout in the property sector, BBMG should be insulated from any slump by its significant revenue from affordable housing, SinoPac Securities said in a report. Affordable housing accounted for 30 per cent of BBMG's property revenue last year.
Revenue from the building materials business surged 25.9 per cent to 5.38 billion yuan last year.
BBMG's net profit rose 20.1 per cent to 3.43 billion yuan last year, while revenue grew 24.3 per cent to 27.41 billion yuan.
The company's net profit came in 6 per cent below consensus estimates and 5 per cent below a JP Morgan forecast, owing to weaker returns from cement and property.