Displaying items by tag: Asia Cement
Asia Cement revenue falls by 22% to US$986m in 2015
21 March 2016China: Asia Cement’s revenue has fallen by 22% year-on-year to US$986m in 2015 from US$1.26bn in 2014. Its gross profit fell by 50% to US$148m from US$295m. It blamed the result on falling demand and ‘intense’ market competition leading to a 10-year market low price of cement in August 2015.
The Chinese cement producer reported sales volumes of 28Mt of cement in 2015, a similar figure to 2014. Clinker sales volumes rose slightly to 1.76Mt. By region sale volumes of cement fell in the group’s Southeastern, Central and Eastern regions but rose in the Southwestern region. The biggest fall was noted in the Eastern region, where sales volumes fell by 11% to 2.34Mt.
Measures the cement producer has taken to cope with the market include cutting costs, pushing efficiency drives and focusing on overseas markets. In May 2015, the Group's silo in Taizhou commenced operation and started exporting products. A total of 230,000t of different cement products were exported to Singapore, the US and other overseas markets during 2015.
Asia Cement noted in its outlook that China has entered an ‘adjustment’ phase in 2016 as market demand continues to decline and production capacity continues to rise. It expects the industry to ‘first fall and then rise’ in 2016 with demand picking up on the back of new infrastructure projects including the Yangtze River Economic Belt development strategy. In the medium term the group has pinned its hopes on continued government-implemented structural reform in the cement industry to eliminate overcapacity.
Asia Cement expects loss in 2015
29 January 2016China: Asia Cement expects a loss for 2015 due to lower product selling prices and foreign exchange losses from US Dollar-denominated loans. The producer reported a net profit of US$120m in 2014. Its financial results for 2015 will be released by the end of March 2015.
Six cement makers fined for price rigging in South Korea
05 January 2016South Korea: South Korea's antitrust watchdog has fined six local cement makers a combined US$168m for fixing the prices of cement products and divvying up the market, according to Dow Jones.
According to the Fair Trade Commission (FTC), cement companies have allegedly colluded to rig the prices of cement products by controlling output and market share in 2011. The suspected companies are Ssangyong Cement Industry Co., Tongyang Cement & Energy Corp., Hanil Cement Co., Sungshin Cement Co., Hyundai Cement Co. and Asia Cement Co. Ssangyong was set to take 22.9% of the total market share, while Tongyang and Hanil were in charge of 15.1% and 14.9%, respectively.
"Managers of the six companies had regular monthly meetings to oversee whether or not the members had complied with the arranged shipments," said the FTC. The prices of cements surged by 43% year-on-year in April 2012.
Industry leader Ssangyong was slapped with US$73.6m of fines, followed by Hanil with US$34.5m and Sungshin with US$36.7m. Tongyang was exempted from the penalty, as the cement maker has been under court receivership since October 2013.
The FTC said that it will strictly crack down on price-rigging practices in backbone industries to build sound market order and fair competition.
A Game of Cement Companies
18 November 2015People matter in cement companies. Just ask Bruno Lafont, the originally proposed CEO of LafargeHolcim before the merger plans between Lafarge and Holcim changed in mid-2015. Another example is Zhang Bin, the chairman of Shanshui Cement. Some of the shareholders at Shanshui Cement are working hard to remove him. The next attempt has been scheduled for 1 December 2015.
Shanshui Cement, one of the biggest Chinese cement producers, called for the liquidators this week possibly in response. It decided to apply for provisional liquidation after determining that it would default on onshore debt payments due on 12 November 2015. Earlier in the month it had announced doubt whether it could pay its debts.
The scale of this liquidation is monumental for the cement industry. It is broadly similar to a producer at least the size of Dangote going bust. Shanshui Cement is one of China's top ten cement producers. It defaulted on a US$314m onshore debt payment on 12 November 2015.
Based on Global Cement Directory 2015 data, Shanshui Cement is the seventh largest cement producer in the country with 15 cement plants and a cement production capacity of 30.5Mt/yr. Shanshui Cement itself reports that it has a production capacity of 102.6Mt/yr making it the country's fourth largest cement producer. In its 2014 annual results Shanshui Cement reported sales revenue of over US$2.4bn. Its net profit was over US$48m. Sales and profits were down year-on-year in 2014 compared to 2013 and its interim report for 2015 reported the same downward trend. Sales revenue fell by a third to US$793m year-on-year for the first half of 2015. In 2014 its total debt was reported to be US$2.5bn with a gearing ratio of 56.9%, a relatively high figure leaving it vulnerable to decreasing profits.
As the Wall Street Journal and others have reported, the situation has as much to do with corporate politics as it does with over-borrowing. Hot on the heels of Shanshui's liquidation announcement came an offer of help to pay the debts from local rival Tianrui Group if its attempts to change the board of Shanshui were finally successful. Tianrui became the largest shareholder of Shanshui in April 2015 when it increased its stake to 28%. In the process it beat China National Building Material Company and Asia Cement Corporation, who hold 16.7% and 20.9% stakes in Shanshui respectively.
The heart of the Shanshui debacle is the 'key man' clause as reported by Reuters. Borrowing to the company is dependent on current chairman Zhang Bin retaining his position. As soon as he leaves it triggers the repayment of offshore bonds worth US$500m. Normally not due for payment until 2020, the bonds contain a clause that forces the company to sell them within 30 days should Zhang Bin depart.
Shanshui seems likely to be able to pay its debts judging from its sales revenue, assets and the strength of its main shareholders. However, it has chosen to default for the moment. The question for analysts watching this from outside China is whether it masks deeper problems in the Chinese economy as growth continues to slow and industrial overcapacity lingers. Shanshui is the sixth mainland Chinese company known to have defaulted on a bond this year, according to Bloomberg. It's also likely to be operating at a cement production utilisation rate of around 50%.
If the Shanshui Cement situation is more to do with markets than personalities, then it may represent an alarming acceleration of the slowdown of the Chinese economy for the cement industry. If personalities matter more, then the situation is a battle comparable to the politics on the television show 'Game of Thrones.'
Asia Cement expects loss in 2015
14 September 2015China: Asia Cement said it expects to record a net loss for the nine months that end on 30 September 2015 compared to a net profit for the same period in 2014. The loss in first three quarters of 2015 was primarily attributed to the decrease in average sales prices and the foreign exchange loss from US Dollar-denominated bank borrowings as a result of the devaluation of the Chinese Yuan.
China – the new not-so normal
26 August 2015The Chinese stock market volatility this week has not been a surprise for the cement industry. The question for both the local cement industry and the wider economy is how the current economic jitters are being managed. Are we witnessing the long expected hard landing of the Chinese economy or will the state planners been able to dodge it?
Growth in the housing market and infrastructure spending has been falling. The country's cement producers have reduced their production growth as the industry consolidates. First half profits in 2015 have fallen for many Chinese cement producers including China Resources Cement and Asia Cement. Anhui Conch, one of the top three cement producers in the world, reported that its first quarter profits in 2015 fell by 31%.
Chinese cement production figures have always seemed incompatible with other data suggesting incomplete information. For example, the Global Cement Directory 2015 reported China's cement production capacity at 1.48Bnt/yr. At full capacity utilisation this would suggest a national cement consumption of 1057kg/capita, a figure that bears no resemblance to any other country on earth with the exception of petrochemical giants like Saudi Arabia and Qatar. Although, to be fair to China, it's recent economic growth has been unprecedented. Poor reporting, the country's unique state regulated capitalism, language difficulties and other factors may all have contributed to confusion among western analysts.
In mid-August 2015 China devalued the Yuan in its biggest drop in 20 years. It is likely it was a strategy to boost exports to rally markets against a sliding stock market since mid June. At the time of writing the Chinese authorities have now tried cutting interest rates with a similar aim and the markets have rallied.
The effect of a devalued Yuan is relevant due to China's overcapacity in several heavy industries such as a steel and cement. Already European and North American steel bodies have cried out against the threat of fresh Chinese exports undercutting their business. Clinker exports are likely to pose less of a risk given its relative low value and high transport costs. Even so, China exported less than 15Mt in 2013, a tiny portion of its production capacity. Altering the exchange rate might well help that export figure creep up. This would be bad news for local cement producers in coastal areas of East Africa for example. Here, Chinese imports might be harder to resist than, say, southern Asian ones, due to Chinese investment in the region. Recent spats over Chinese cement imports in Kenya and Zimbabwe underline this issue.
More worrying for the wider cement industry will be the risk of Chinese cement plant manufacturers and suppliers further undercutting western firms. Eurocement signed a deal with Sinoma in November 2014 for the Chinese equipment producer to supply three 3Mt/yr production lines for US$93.3m each or just over US$30m per 1Mt of production capacity. Compare this to FLSmidth's charge to a Qatari firm of US$190m in October 2014 to build a 2.24Mt/yr production line or just over US$80m per 1Mt of production capacity. This is not a completely fair comparison due to the plants being in completely different regions, but it gives some idea of the price pressures non-Chinese equipment manufacturers face. In their defence the usual argument is that their equipment is better made. However, cement producers being able to buy even cheaper Chinese kit will not help their plight. Today we report on Dangote Cement signing yet more contracts with Sinoma to build new cement plants in Africa.
The actions of the Chinese financial authorities show that they are trying careful tweaks one-by-one to fix the situation. The real problem though is that, as China transitions from a developing nation into a developed one, broader structural changes to the general economy may be required instead of tweaks. A massively over-producing cement industry is a symptom of this and how the country copes with it is instructive to how it will succeed overall. Bold attempts to consolidate the industry have shown willingness in recent years. Unfortunately the current crisis may artificially prop up an industry that should be reducing in size.
Asia Cement’s first half 2015 revenue down by 23%
05 August 2015China: Asia Cement said that its profit attributable to owners for the first half of 2015 plunged by 97.4% year-on-year to US$1.59m in the first half of 2015. The decrease in net profit was attributed primarily to the fall in average cement sales price. Its revenue fell by 23.1% to US$484m and its gross profit margin on revenue dropped to 14% from 24% in the same period of 2014. No interim dividend will be distributed.
Asia Cement considers buying Ssangyong Cement
28 October 2014South Korea: Asia Cement is considering the acquisition of South Korea's Ssangyong Cement. According to investment banking sources, Asia Cement is currently discussing the feasibility of purchasing a 46.8% stake in Ssangyong Cement for US$762m.
In terms of shipments, Asia Cement is the seventh-largest cement producer in South Korea with a market share of 6.9% in 2013. During 2013 it posted sales revenue of US$418m. During the same period, Ssangyong Cement recorded US$1.96bn in sales revenue and a market share of 22.0%.
Asia Cement unit plans to buy Sichuan cement plant
04 April 2014China: Asia Cement said that its subsidiary interest Sichuan Yadong Cement has entered into a framework agreement with the existing shareholders of Sichuan Lanfeng Cement to acquire their entire equity interest in Sichuan Lanfeng and thus indirectly the entire equity interest in Sichuan Lanfeng's wholly-owned subsidiary, Sichuan Lanfeng Building Materials.
The target companies principally engage in the manufacture and sale of cement, concrete and related products in Sichuan Province. They operate a cement plant located in Pengzhou City, Sichuan which comprises two new dry process clinker production lines with a total cement production capacity of 5Mt/yr.
The parties are expected to sign the formal sale and purchase agreement before 16 April 2014.
Italcementi considering Myanmar market move
12 March 2014Myanmar: Italcementi is considering entering the Myanmar market in the next few years, its chief executive has said. Carlo Pesenti said that the Italy–based international cement producer was negotiating with a local partner in Myanmar and studying the country's foreign investment law, in an interview with The Nation.
Italcementi is already active in Southeast Asia through its Jalaprathan Cement and Asia Cement subsidiaries in Thailand. In 2013 the country helped shore-up Italcementi's annual results with a rise in turnover of 18.1% year-on-year to Euro269m and earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 58.8% to Euro51.5m. Italcementi Thai cement shipments increased by 13.8% as an additional kiln was brought back on-stream.