Chinese glassmaker takes Silk Road with eye on spot among world’s top three producers

China Glass and Hony Group joint venture to start fund targeting glass production in Belt and Road Initiative countries

PUBLISHED : Thursday, 14 December, 2017, 4:00pm
UPDATED : Thursday, 14 December, 2017, 10:03pm

China Glass, which aims to be among the world’s top three glass makers in three years, has joined its shareholder, Hony Group Management, to set up a fund to invest in glass factories in countries covered by Beijing’s Belt and Road Initiative.

China Glass, which is backed by state-controlled cement giant China National Building Material (CNBM), struck an agreement to form a joint venture for the fund’s establishment, it said in a filing to the Hong Kong stock exchange on Thursday.

The joint venture will act as “general partner”, own a 5 per cent stake in and manage the proposed “Belt and Road Glass Fund”. The remaining 95 per cent will be owned by Hony Group, which plans to invest about US$300 million in the fund.

“The group has been actively seeking to expand its glass production businesses outside [China] to leverage on the advantages and opportunities resulting from the Belt and Road Initiative,” China Glass said.

The Belt and Road Initiative covers more than 60 countries in Central, Southeast and South Asia, the Middle East, Russia and Europe, with whom China wants to develop closer trade and investment partnerships. Many are emerging markets going through urbanisation and industrialisation that requires construction materials, including glass products.

The fund has already confirmed the acquisition of a 69.71 per cent stake in Orda Glass, which owns a project to build a float glass manufacturing line with an annual output capacity of 197,000 tonnes in Kyzylorda, Kazakhstan, China Glass said.

CNBM became the largest shareholder in China Glass a year ago by buying shares from the Britain-based and Japanese-owned international glassmaker Pilkington, raising its stake to 23 per cent from 14.4 per cent. Hony Group, a private equity investment unit of Hong Kong-listed conglomerate Legend Holdings, has a 22.8 per cent stake, while Pilikington retains a 12.9 per cent share.

CNBM’s vice-president and China Glass’ chairman, Peng Shou, said in June that China Glass plans to add at least one overseas project every year through acquisitions and new plant construction, in emerging markets covered under the Belt and Road Initiative, as well as in developed markets. These include the US, Europe, Central Asia, Egypt, Southeast Asia and South America, he said.

CNBM, the world’s largest construction material maker and China’s sixth-largest glassmaker, also wants China Glass to become a platform for it to execute Beijing’s overhaul of mainland China’s fragmented glass industry, which suffers from low profitability due to excess capacity.

CNBM plans to restructure loss-making glass production plants it acquires from various local governments and over time inject them into China Glass to help the latter realise its goal of becoming the world’s third-largest glassmaker.

Shares in China Glass were flat in Thursday morning trade at 68 HK cents. The company’s stock has fallen by 17 per cent year to date.