Conch plans investment in quake-hit region

Conch plans investment in quake-hit region
Published: 19 May 2008

Leading Chinese cement producer Anhui Conch Cement Co Ltd plans to speed up capacity expansion in the aftermath of the most devastating earthquake to hit the country in decades. The company now plans to invest up to 5 billion yuan ($715 million) to build three new plants in Sichuan province -- one in the city of Guangyuan and two in Dazhou -- with a total capacity of 12 million tonnes a year by 2010, executive director Guo Jingbin told Reuters. Anhui Conch, the biggest of a clutch of local players such as TCC International Holdings and foreign operators such as LaFarge’s venture with Shui On Construction, are expected to bump up capacity to aid a massive reconstruction effort after the quake damaged buildings and infrastructure across Sichuan, a province the size of Spain. Expectations of strong demand from large-scale reconstruction and infrastructure projects have helped to boost Anhui Conch’s shares 18 percent in the past week, outpacing a 5 percent gain on the index for Chinese firms listed in Hong Kong.

Anhui Conch also plans to expand into other parts of western China, including the city of Chongqing and the provinces of Gansu, Guizhou and Shaanxi. In all, its western expansion could boost the company’s capacity by 50 million tonnes in the next three to five years and cost 15 billion yuan, Guo said. The firm expects to boost capital expenditure 43 percent to 10 billion yuan in 2009, from about 7 billion yuan in 2008. To bankroll expansion, the company is raising $1.6 billion by selling shares in Shanghai. Guo said the firm saw no further need to sell shares over the next three to five years.

Anhui Conch had capacity to make 69 million tonnes of clinker and 81 million tonnes of cement a year at the end of 2007. Existing projects will add 14 million tonnes of clinker and 15 million tonnes of cement capacity this year. The company is selling up to 200 million yuan-denominated A shares at 57.38 yuan apiece, raising up to 11.5 billion yuan for capacity expansion, to repay debt and invest in residual heat electricity generation -- savings from which Guo said would help boost the firm’s profit by 900 million yuan in 2008 and 1.3 billion yuan in 2009.