Company to substitute coal fuel for oil, continue export drive as rival producer points to oversupply in mainland market China Glass Holdings has blamed high oil and raw material prices for a collapse in margins and a 56.9 per cent plunge in earnings in its first profit result since listing on the stock market in June. Although the sharp spike in oil prices occurred only after the company's six-month reporting period closed and in the same month that it listed, the mainland glass maker said net profit had fallen by 56.87 per cent to 16.02 million yuan because of high oil prices. 'Oil rose beyond our expectations. The figures may cause some to despair but we are hopeful about the foundation of our growth,' said chairman John Zhao Huan, unveiling the results yesterday. 'High raw materials prices, such as those for heavy oil and soda ash, affected the company's performance in the first half,' added chief executive Zhou Cheng. The company's turnover fell 5.77 per cent to 193.36 million yuan and its net profit margin fell to 8.3 per cent in the first half, down from 18.1 per cent during the same period last year. In the same period, another listed mainland glass maker, Zhejiang Glass, posted a decline in net profit of 36.53 per cent to 69.73 million yuan. Zhejiang Glass' turnover barely rose, up by just 0.63 per cent to 568.77 million yuan. But in addition to high prices for both oil and raw materials, Zhejiang Glass' management also blamed oversupply in China's glass industry for the company's poor performance. Spot oil prices reached US$67 a barrel at their peak last month and remained at about US$65, but for most of the first half of the year oil was about US$45 a barrel. The cost of soda ash, which accounted for 28 per cent of the company's cost of sales, soared 42 per cent in the first half, Mr Zhou said. To reduce costs, China Glass would replace all its oil raw material with coal fuel, which was 15 per cent cheaper than oil, by the end of this year, he said. In addition, the company would attempt to maintain the rapid growth of its exports to maintain profit margins, as its export price was 22 per cent higher than its domestic selling price in China, he said. China Glass' exports tripled to 71.01 million yuan in the first half, accounting for 36.7 per cent of its sales, up from 22.2 per cent of total sales in the first half of last year. The company's third glass production line would start operation on Saturday and would increase its production capacity by 66 per cent and improve economies of scale, Mr Zhou said. Most of the $180 million proceeds of China Glass' initial public offering funded the new production line. 'With the strong support of our shareholders, Legend Holdings and Pilkington, the company will make every effort to seek mergers and acquisition opportunities,' Mr Zhao said. Legend Holdings, the parent of Lenovo Group, has a 25 per cent stake in China Glass, while British glass manufacturer Pilkington owns 9.9 per cent. Mr Zhou said a key driver in China's glass industry was the government's policy of consolidating the industry through mergers and acquisitions. 'This provides us with increasing mergers and acquisition opportunities,' he said. China's float glass production grew 14.5 per cent to 173 million weight cases in the first half, according to the National Bureau of Statistics. In the same period, China Glass produced 2.84 million weight cases of float glass.