After years of effort to extend operations to China, Taiwan’s two leading cement conglomerates, including Taiwan Cement Corporation and Asia Cement Corporation, are generating considerable profits from operations on the mainland.
Both Taiwan Cement and Asia Cement are expected to realise sizable improvements in earnings in the mainland in 2008. Their production in the mainland will challenge that in Taiwan for the first time in 2008. Both companies will very likely see earnings in the mainland break the CNY500m (US$67.56m) mark in 2008.
Over the past several years, Taiwan Cement and Asia Cement have carved out solid shares in southern and central China markets, respectively. Both companies are still ratcheting up investments to expand production capacity there.
At present, Taiwan Cement has two and Asia Cement has three cement kilns in the mainland capable of volume production. Still, Taiwan Cement has six and Asia Cement has three kilns to be inaugurated from 2008 to 2009.
The competition between Taiwan Cement and Asia Cement in the mainland has expanded from production capacity to revenues, despite having chosen different regions to set up production.
Thanks to the increased demand for cement in the mainland, Taiwan Cement recently has raised its price to 380 RMB (US$51.35m) per metric ton in Guangdong province while Asia Cement quoted 400 RMB (US$54.05m) per metric ton for its products sold in Chengdu of Sichuan province. With both consistently raising cement prices, Taiwan Cement and Asia Cement will likely see substantial growth in earnings in the months to come.
An institutional investor estimated Taiwan Cement would be able to roll out 7.5Mt of cement in the mainland this year. Including the three million metric tons from the output of the acquired Jingyang cement, the company would see overall production capacity reach 10.5Mt in the mainland this year, equivalent to its annual production capacity in Taiwan. The company expects to see annual earnings to reach at least CNY200m (US$27.02m) from mainland operations this year.
With several production lines to begin mass production, Taiwan Cement will see total production amount to 21Mt in the mainland in 2008, double that of domestic production capacity.
After realizing CNY100m (US$13.51m) in earnings in the mainland last year, Asia Cement has posted CNY300m (US$40.54m in earnings as of the end of October this year. By the end of this year, the company would challenge CNY350m (US$47.29m) in annual earnings in the mainland. The company will see total production capacity reach 11Mt of cement in the mainland in 2008, double that of its domestic production capacity.