Producers see lower earnings from core business in Taiwan

Producers see lower earnings from core business in Taiwan
Published: 05 September 2007

Taiwan’s cement firms are suffering shrinkage in earnings from core business in domestic market while posting growth in mainland China.  
 
All the listed cement firms on the Taiwan Stock Exchange and over-the-counter stock market encountered declines in earnings in the first half of this year, with  Lucky Cement Corp. posting the largest decline in earnings at 60% year-on-year in the first half.  
 
Impacted by the demand slump in domestic market, Taiwan Cement Corp. and Asia Cement Corp., Taiwan’s two-largest cement producers, posted NT$1.29 billion (US$39.09m at US$1:NT$33) and NT$1.05 billion (US$31.81m) in operating income in the first half of this year, down 12.2% and 11.8% year-on-year, respectively. 
 
Taiwan Cement noted it exported 2.8Mtof cement in the first half of this year, compared to only 2.4Mt for domestic sales. This was the first time for the company to see exports exceed domestic sales.  
 
Nevertheless, Taiwan Cement’s president Huang Chien-chiang believed his company would see domestic sales recover to past level in the fourth quarter of this year when was traditionally a peak sales season for domestic cement market.  
 
Universal Cement Corporation noted it posted the same operating losses in the first half of this year as the year earlier. Universal president Lee Kuo-tung said the construction industry in southern Taiwan in the first half of this year did not recover as expected. To cut operating losses, the company has recently resolved to temporarily halt production of its pre-mixed concrete in Linfengying of Tainan County, southern Taiwan. Lee said his company lost an average of NT$1m (US$30,300) monthly since the beginning of this year in the Linfengying plant.  
 
With an annual production capacity reaching 150,000m3 of pre-mixed concrete, the Linfengyin plant saw actual output amount to only 93,000m3 last year. The company sold 28,000m3  of pre-mixed concrete in the first half of this year, compared to the projection of 88,000m3.  
 
Others in this field, including  Chia Hsin Cement Corp.,  Lucky Cement Corp.,  Southeast Cement Corp. and  Hsing Ta Cement Co., also saw declines in operating income in the first half of this year. Of them, Lucky registered NT$74.74 million (US$2.26 million) in operating income in the first half of this year, down 64% year-on-year. 
 
Asia Cement said it has been enjoying growth in operating earnings in the mainland thanks to its heavy investments over the past several years. T.H. Chang, president of Ya Dong Cement, Asia Cement’s subsidiary in the mainland, said demand for cement in the mainland would continue growing to 2015 at least. He stressed his company won’t meet tough competition in the mainland in the foreseeable future.