China Glass seeking to buy out weak rivals

China Glass Holdings is on the prowl for acquisitions as a credit crunch on the mainland threatens to force some of its competitors out of business.

The flat glass manufacturer yesterday reported a 24.2 per cent drop in net profit to 125.96 million yuan (HK$153.95 million) for the first half. But after stripping out one-off gains from the disposal of a subsidiary and an associate in the year-ago period, net profit was up 45 per cent.

Major glass factories on the mainland reported profit declines of about 50 per cent in the first half because of higher raw material and fuel costs and falling glass prices.

China Glass' gross margin fell to 21 per cent from 27 per cent.

The decline in new flat glass construction on the mainland against a background of tighter credit and policy measures aimed at curbing soaring property prices coincided with a plunge in glass prices, said Cheng Xin, a vice-president of China Glass.

The price of clear glass fell to less than 80 yuan per square metre in June from more than 100 yuan at the end of last year.

'Some manufacturers are operating at break-even point,' Cheng said. 'We approached some potential targets for acquisition in the first half, but the timing was not right.'

He said clear glass would rebound to above 80 yuan in the second half, with the construction of 'affordable housing' encouraged by Beijing to rein in rising property prices.

'The market will be polarised. Producers of clear glass will be under great pressure while value-added coated glass manufacturers will see demand picking up,' he said.

Prices of coated glass, which can block sunlight and save on electricity costs for air conditioning, rose 10 to 15 per cent higher than regular glass.

China Glass aims to increase the percentage of coated glass to 45 per cent of total production by next year from 30 per cent now.