Pipe maker confident it can turn around rebar firm
Chu Kong Petroleum & Natural Gas Steel Pipe, one of the mainland's largest suppliers of pipes to the oil and gas industry, is confident it will turn around the unprofitable maker of reinforcing bars it acquired recently.
The company, based in Panyu, Guangzhou, agreed last month to buy Nanjing Rongyu Group, a maker of rebar used in buildings, bridges, and roads, for 80.4 million yuan (HK$101.7 million).
Chu Kong's chairman, Chen Chang, said after the firm's annual shareholders meeting: "As we do a good job in building our steel pipe business, we would also like to diversify a bit in the supply chain."
Chen said Chu Kong's pipes were already used in building bridges, theatres, airports, exhibition centres, and power grid towers; and the group was exploring applications for steel pipes in nuclear power plants, offshore oil platforms and wind power plants.
Marketing synergies could be reaped from selling steel pipes and rebar to the same customers, he said.
Nanjing Rongyu was previously run by steel traders not familiar with production, Chen said, and Chu Kong was confident it would turn its net loss of 151,000 yuan last year into a profit this year, as it could procure materials cheaper and deploy its engineers to improve its work flow. Nanjing Rongyu has an annual output capacity of 200,000 tonnes.
Chu Kong is also building a two million tonnes-a-year steel plates plant in Lianyugang, about 200 kilometres north of Nanjing, for 400 million yuan, which it said could boost its profit margin by 6 percentage points. The steel plates will be processed by its facilities in Guangzhou.
Chen said Chu Kong was mulling whether to sell, independently develop, or co-develop a piece of land adjacent to its Panyu factory.
It paid a premium of 425.5 million yuan to convert the industrial land into commercial land.
Valuer RHL Appraisal said the land's value had increased after the conversion from 120 million yuan to two billion yuan.