Chia Hsin earnings plunge

Chia Hsin earnings plunge
Published: 15 March 2006

Chia Hsin Cement Greater China Holding is boosting its export business after earnings plunged 99.2 per cent last year.  The Taiwanese-run cement manufacturer yesterday reported that net profit fell to US$103,000 last year from US$14.69m in 2004, although revenue rose 11.6 per cent to US$91.48m. It blamed surging fuel costs and macroeconomic curbs on the mainland for the result. 
 
"The cement market has bottomed out, and recovery, which started in the second half of last year, is expected to continue this year," chief executive Jason Chang Kang-lung said. "We also expect energy costs to stabilise this year," he said, noting that prices of coal fuel jumped 19.9 per cent and electricity costs rose 9.1 per cent last year. 
 
Mr Chang said the company would step up its export business, which is expected to generate 80 per cent of the profit this year. It contributed 57.4 per cent of the gross profit last year, up from 15.4 per cent in 2004.

"Our export business is the key to profitability," he said.  The company exports to North America as well as Asia, including New Zealand, and Africa. 
 
Domestically, preparations for the 2008 Olympic Games are boosting demand for cement, according to Mr Chang. Prices of cement are also expected to stabilise this year.  However, he predicted further consolidation and restructuring in the industry. 
 
The group planned to set aside US$40m to US$60m for mergers and acquisitions, and had been in talks with potential targets.  An acquisition deal was expected to be concluded by the end of this year, Mr Chang said. 
 
China’s campaign to halt overproduction in certain industries to prevent overheating in the economy has severely affected the cement sector.  Last week, competitor China Resources Cement announced an 84.79 per cent plunge in net profit last year.  Chia Hsin shares yesterday closed unchanged at $1.06.