Rising prices lift earnings outlook for CNBM, China

Rising prices lift earnings outlook for CNBM, China
Published: 27 August 2008

China National Building Material (CNBM) expects second-half profit to be boosted by rising cement prices after earnings more than doubled in the first six months amid surging demand.
 
"China National Building Material has enlarged production by acquisitions and cement producers are also benefiting from rebuilding in earthquake-shattered Sichuan province," chairman Song Zhiping said in a statement.
 
The company has planned to spend CNY33.3bn on acquisitions to expand in southern China and the Huaihai area in Jiangsu, Anhui, Henan and Shandong provinces.
 
Total annual cement output will increase to 174Mt by next year from 11Mt in 2006, giving it a larger market share and better pricing power.
CNBM production doubled in the first six months to 10.8Mt of cement and 11.5Mt of clinker.
 
Cement is produced by grinding clinker into powder.
 
According to figures from the National Development and Reform Commission, the mainland produced about 648.05Mt of cement in the first half and eliminated about 20Mt of capacity.
 
The central government has been closing small cement producers and encouraging big firms to take over the more polluting and inefficient manufacturers.
 
The 11th Five-Year Programme aims to eliminate 250Mt of production at sub-standard manufacturers.
 
"Profit margin of China National Building Material has improved since the second quarter of this year as it benefits from intensive old capacity closure in Shandong and Zhejiang, which drove retail prices up," Bruce Wang, an analyst at BNP Paribas, wrote in a report.
 
BNP Paribas estimates CNBM has a 60 per cent market share in Zhejiang province, compared with rival Anhui Conch Cement’s 10 per cent.
 
The company’s average selling price for cement in the first half was 210 yuan a tonne, up from 189 yuan a year earlier.
 
The price of clinker rose to CNY197/t from CNY156.