Anhui Conch, Sinoma plan to spend 40b yuan

PUBLISHED : Thursday, 24 April, 2008, 12:00am
UPDATED : Thursday, 24 April, 2008, 12:00am

Infrastructure demand spurs capacity expansion

Mainland construction materials giants Anhui Conch Cement and China National Materials (Sinoma) yesterday said they would spend a combined 40 billion yuan (HK$44.67 billion) to expand capacity, a sign that austerity measures are not dampening demand for new infrastructure.

Anhui Conch, the mainland's largest cement maker, will spend 20 billion yuan to build production lines over three years.

Sinoma, the country's largest cement equipment and engineering services firm that listed in Hong Kong in December last year, will set aside the same amount in capital expenditure for the next two years.

Despite Beijing's monetary tightening policies, demand for bridges, roads and airports is expected to remain strong as the world's fastest-expanding major economy continues to achieve double-digit growth.

'After the expansion, our production capacity will rise by about 60 million tonnes from 100 million tonnes,' Anhui Conch executive director Guo Jingbin said.

Anhui Conch said first-quarter net profit surged 98.51 per cent to 449.6 million yuan, while revenue grew 27.46 per cent to 4.62 billion yuan.

Mr Guo said cement prices still had strong growth potential.

Last year, average prices rose 7 per cent to about 600 yuan per tonne, a growth rate far less than other raw materials, such as steel.

'Prices this year will have a similar growth level to last year,' said Mr Guo.

Rising demand and the decision to cut corporate tax to 25 per cent from 33 per cent would boost profitability, he added.

The company has sought approval from the central government to raise as much as 11 billion yuan by issuing new A shares.

'We'll look for the right time to issue these new shares,' said Mr Guo. 'But we have strong cash flow to sustain our expansion plans if the market is too volatile for that.'

Meanwhile, Sinoma chairman Tan Zhongming said the company would focus on expanding its cement and glass fibre businesses through acquisitions.

The company has four main businesses - equipment and engineering services, glass fibre, cement and high-technology materials.

Net profit increased 67.7 per cent last year to 472.7 million yuan as revenue grew 51 per cent to 19.6 billion yuan.

Sinoma president Wang Wei said overseas projects were another key way for the company to improve profitability.

'Last year, our overseas contracts totalled US$2.2 billion,' Mr Wang said. 'From January to now, these contracts have already exceeded last year's total.'

Sinoma has nominated Africa as a priority market, followed by Russia and South America.

Anhui Conch shares closed up 5.35 per cent at HK$63 yesterday, while Sinoma shares rose 2.2 per cent to HK$6.97.