Asia Cement (China) Holdings will spend US$500m to US$600m doubling production capacity this year and next to meet growing demand driven by the stimulus package and post-earthquake reconstruction in Sichuan province.
The Taiwan-invested firm will build four cement kilns, which will be operational by the end of next year. Each kiln would require about US$150m, chairman Hsu Shu-tong said.
That would double the firm’s annual production capacity from 10Mt last year to 20Mt by the end of next year, Mr Hsu said. Two kilns will be in Hubei province, one in Chengdu, near the site of last year’s earthquake, and another in Jiangxi province.
As the firm’s production capacity would double, revenue would grow at a similar pace, Mr Hsu said. Asia Cement’s revenue grew 44 per cent to ¥3.25bn (HK$3.67bn) last year, while net profit soared 67 per cent to ¥410.72m.
"At this particular moment, both the stimulus measure and Sichuan earthquake reconstruction are important. Of the ¥4trn package, 38 per cent is destined for infrastructure. Of course, we would enjoy that one. Whenever they need buildings [in the stimulus package], it will help our business," said Mr Hsu.
He noted the central government was encouraging construction of buildings in rural areas, which would create demand for his firm’s cement.
Asia Cement was supplying cement to a high-speed rail and an expressway in Hubei, and each project would consume 500,000 to 1Mt of cement from the firm, Mr Hsu said.
All these infrastructure projects were driven by the stimulus package, he said.
"In Sichuan, due to post-quake reconstruction, cement demand will remain very strong till 2010," wrote analyst Carmen Wong in a Phillip Securities Research report, and profit would hit ¥820.3m next year.