China Shanshui Cement Group posted a record net profit of 702 million yuan (HK$796.9 million) for the year ended December 31, 2009 - up 30.2 per cent from the 539 million yuan reported in 2008. 'The policies launched by the central government effectively reduced the oversupply in the industry and promoted its healthy development,' says company chairman Zhang Caikui. For this year, Zhang adds, a combination of the economic stimulus packages introduced by the government, rapid urbanisation on the mainland and new rural construction projects will further boost demand for cement. 'To grasp the lucrative opportunities within the industry, we will speed up construction projects, optimise the network in Shandong and Liaoning provinces and accelerate our expansion in other provinces and regions such as Shanxi and Inner Mongolia,' Zhang says. The group also has plans to expand its marketing network, strengthen the market influence of its 'Shanshui Dongyue' brand and further develop its regional presence through expanding its market share. The group experienced difficulties in the fourth quarter as severe weather conditions on the mainland led to the suspension of construction and infrastructure, resulting in a drop in sales of cement and clinker. But since expenses were controlled during the earlier parts of the year, it recorded an overall year-on-year drop in the proportion of sales and marketing expenses, administrative expenses and finance costs to sales revenue. 'The group achieved outstanding performance and hit record highs in its annual sales volume, revenue and net profit in 2009,' Zhang says. 'The sustained growth in infrastructure construction projects and the recovery of the real estate industry have pushed up demand for cement in Shandong and Liaoning provinces.' The group's businesses in Shandong recorded a 13.8 per cent year-on-year increase in sales revenue to 7.51 billion yuan, representing 86.1 per cent of total sales revenue. Revenue from the northeastern region increased 35 per cent to 1.22 billion yuan, or 13.9 per cent of total revenue. The average selling price of cement in Shandong and northeastern China was 221.5 yuan and 245.8 yuan per tonne respectively during the year. The group anticipates growth in profit from its businesses in the northeastern region, with the operation of new clinker production lines and the expansion of the group's market share in the region. 'The group has adopted an aggressive marketing strategy, pushed forward merger and acquisition projects and stepped up construction of new production facilities,' Zhang says. These initiatives helped merge the group's market leadership in Shandong and Liaoning provinces and helped speed up its expansion plans in Shanxi and Inner Mongolia. Furthermore, the operations of the group's residual heat power generation stations helped reduce power and clinker costs, while the inauguration of new dry process clinker production lines in Liaoning reduced the amount of coal consumption per unit of output. Together with the decrease in average unit purchase price of coal during the period under review, the group lowered its proportion of coal expenses to sales revenue. Revenue surged 16.4 per cent from 7.5 billion yuan in 2008 to 8.73 billion yuan last year, while gross profit rose 12.2 per cent from 1.59 billion yuan to 1.78 billion yuan. Demand for high-quality cement was driven by government infrastructure projects which led to a year-on-year increase in demand for high-grade cement of 49 per cent to 14.8 million tonnes, representing 50.5 per cent of the group's total cement sales compared with 39.7 per cent a year earlier. Basic earnings per share reached 25 fen for the year ended December 31, 2009, compared with 23 fen a year earlier. The board recommended a payment of 9.7 HK cents per share as the final dividend for the period.