Cement shares fall on economic tightening

Mainland-based cement producers listed in Hong Kong fell sharply yesterday, with industry players blaming the drop on the bleak global economy and liquidity tightening.

It comes after the State-owned Assets Supervision and Administration Commission (Sasac) outlined tighter controls over the mainland's cement industry. Sasac announced the temporary suspension of major high-energy consumption projects, including cement plants, as well as strict controls on loans to cement projects. Sasac also called for the faster elimination of obsolete mainland cement plants.

The share prices of the mainland's two largest cement producers, Anhui Conch and China National Building Material (CNBM) plunged 8.2 per cent to HK$29.20 and 8.3 per cent to HK$11.64 respectively. The share price of another large mainland cement producer, China Resources Cement, fell 6.7 per cent to HK$6.80.

Two mainland firms which have large cement businesses, BBMG Corp and China National Materials (Sinoma), saw their shares slide 5.1 per cent to HK$7.80 and 9.9 per cent to HK$4.08 respectively.

The prices of West China Cement and China Shanshui Cement fell 9.8 per cent to HK$1.85 and 8.5 per cent to HK$7.15 respectively. TCC International Holdings and Asia Cement (China) Holdings dropped 4.4 per cent and 5.0 per cent respectively.

'The drop is due to the global economy,' said China Resources Cement strategic development director Max Yu Zhongliang.

Asia Cement financial manager Wu Chien-hua said liquidity tightening and the global economy had impacted on his firm's stock. 'But our sales are still good,' Wu said. 'Our sales in August increased from July.'

Asia Cement's net profit jumped 355 per cent to 638.5 million yuan (HK$776.3 million) in the first half of the year, while revenue rose 68 per cent to 3.83 billion yuan. BBMG's cement and clinker sales volume soared 43.8 per cent to 17.43 million tonnes in the first half. Cement and clinker accounted for 47.2 per cent of BBMG's turnover in the first half, which rose 42.2 per cent to 12.59 billion yuan, while net profit soared 54.1 per cent to 1.64 billion yuan.

'Presently, both the global and mainland economies are slowing down and this may have an impact on all companies. We are closely watching this and taking measures to counter it,' said Jiang Deyi, president of BBMG.

BBMG plans to expand its annual cement production capacity from 40 million tonnes in the middle of this year to 50 million tonnes in 2012.

'The share price drop is driven by negative sentiment in relation to China's macro-economic data which will be released later this week,' said Daiwa Securities analyst Felix Lam.

1.87b

This was the mainland's 2010 cement output, in tonnes.

- The mainland is the world's biggest producer of cement