Expansion and cost-control boost Shanshui Cement

Expansion and cost-control boost Shanshui Cement
Published: 31 August 2010

Hong Kong-listed cement maker Shanshui Cement in the first half of 2010 achieved a net profit growth of 30.2
 per cent to CNY404m YoY, while the revenue grew 22.1 per cent YoY to CNY4.72bn.
 The board did not recommend payment of an interim dividend for the first half-

"In the first half of 2010, the group quickened its expansion pace via new 
construction and acquisition activities," says Zhang Caikui, chairman of
 Shanshui Cement. "We managed to expand our business network in Inner Mongolia
and Tianjin to further optimise our strategic market coverage."

"In addition, the group innovated its management mode, implementing strict
cost-control measures and leverage economies of scale to mitigate the impact of
fluctuating coal prices. During the period under review, we are pleased to
record strong performance in terms of sales volume, revenue and net profit."

During the first half of the year, the group’s revenue was mainly derived from 
the sale of cement, which occupied 72.1 per cent of the group’s total sales
 revenue, with clinker and other products representing 22 per cent and 5.9 per cent

The group sold 15.418Mt of cement, a YoY increase of 21 per cent, translating to
sales revenue of CNY3.4bn, up 17.4 per cent over the same period last

China Shanshui’s businesses in Shandong province and northeastern China have 
made steady progress. Sales revenue from its business in Shandong amounted to
CNY3.99bn, accounting for 84.5 per cent of the group’s total sales revenue.
 Sales revenue from its operation in northeastern China amounted to CNY731m,
 accounting for 15.5 per cent of the group’s total sales revenue and representing
 YoY growth of 51.3 per cent. The average unit selling price of cement
in northeastern China was higher than that in Shandong.

The group expects its 
growing business in northeastern China will drive profit growth.
 During the period, China Shanshui completed eight cement grinding lines, two
 clinker production lines and one technological upgrading project. All have
 started operations.

The group in April also acquired Tianjin Tianhui Cement Company, which has an
cement capacity of 600,000tpa.

Looking ahead, Zhang says that the foreseeable future will be ideal for
bolstering the company’s position in the cement industry.

"The central government will continue to implement its policy of  change of the 
development mode and adjustment of the structure’ towards the cement industry in
 order to remove obsolete production capacity, promote dry process cement
production and encourage the merger and acquisition of large cement enterprises.
 The quicker pace of urbanisation and the new policy of `cement products going to 
the countryside’, initially in Shandong province on a trial basis, will drive
strong demand for cement," he says.

Being a large cement production enterprise equipped with advanced technologies
and possessing significant influence in the region, China Shanshui will leverage
its leadership position in Shandong and Liaoning provinces to expedite the
business plans in Shanxi, Inner Mongolia and Xinjiang.

"Our aim is to increase total production capacity of cement to 65Mt and 80Mt in 
2010 and 2011 respectively, and achieve rapid growth in our business," Zhang 
says. China Shanshui Cement Group says expansion in Inner Mongolia and Tianjin,
 and implementing strict cost-control measures helped the group achieve
substantial growth in its net profit for the interim period ending June 30.