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SCMP Reporter

H-share Zhejiang Glass plans to acquire rival glass manufacturers, saying the time is ripe for mergers and acquisitions in the mainland's flat-glass industry.

The industry is in the middle of a five-year consolidation plan aimed at increasing competitiveness and gaining economies of scale.

Other sectors going through similar consolidation include power, non-ferrous metals and light industries such as breweries.

One of the goals of the glass industry is to set up three to five main groups of flat-glass manufacturers which would control more than 50 per cent of all flat-glass production in China.

Beijing will let the free market decide which firms survive and allow smaller, unprofitable manufacturers to go bankrupt.

There are more than 50 glass manufacturers scattered throughout China, but nearly 80 per cent of them are unprofitable.

'The time for mergers and acquisitions is here. We have the conditions to acquire other glass manufacturers,' Zhejiang chairman Feng Guangcheng told reporters after the company's annual general meeting yesterday.

Zhejiang Glass is one of the few profitable mainland glass manufacturers. Last month, it reported a 29.8 per cent increase in net profit for last year to 212.06 million yuan (about HK$198.76 million).

Mr Feng declined to elaborate on acquisition plans yesterday, but said he might have something to announce in a few months.

Two weeks ago, the company announced it had changed its mind on the use of proceeds from its Hong Kong initial public offering (IPO) last December.

In the company's IPO prospectus, it said it planned to invest 100 million yuan in a joint venture to build two production lines to manufacture patterned glass and wired glass.

However, regulations introduced last April removed the local government's power to approve flat-glass production lines.

Consequently, authorities in Jiangsu province, Zhejiang province and Shanghai approved nine new patterned and wired glass production lines while they still could, instantly making the market more competitive.

Zhejiang Glass has dissolved its joint-venture agreement with Dynamic Goal Worldwide. Instead, it will invest the 100 million yuan into an ultra-thick float glass production line with a daily melting capacity of 600 tonnes.

The float flat-glass market is less competitive as there are only seven production lines capable of producing 4,200 tonnes of ultra-thick float glass per day.



Consolidation prompts Zhejiang Glass to prepare for M&A flood