Holcim to take majority stake in Huaxin Cement

Holcim to take majority stake in Huaxin Cement
Published: 07 March 2006

To be able to participate further in the future dynamic growth of the Chinese cement market, Huaxin Cement Co. Ltd (HCC) - a leading Chinese cement producer -  has decided to increase its share capital through a private placement. Holcim will take up the newly created shares. As a consequence, Holcim’s participation in HCC increases from 26.1 per cent to 50.3 per cent. Holcim will pay about USD 125 million for this share package and will take on a net financial debt of US$300m. It will be evaluated in the future to what extent Holcim will back the transaction with equity in order to safeguard its financial profile.

In total,160 million new A shares with a par value of CNY 1.00 per share will be issued as part of a private placement and taken up by Holcim. The new shares will be issued at a price not lower than 20 per cent above the average price of the listed Huaxin A shares during the 20 trading days prior to the announcement of the Board’s resolution. The private placement is subject to approval by an HCC shareholders’ meeting and the relevant Chinese authorities.

In 1999, Holcim acquired a 23.4 per cent participation in HCC. In 2005, Holcim increased its stake to 26.1 per cent. The partnership between Holcim and HCC has developed favourably for both sides.

With an annual cement capacity of currently 22mt HCC is one of China’s most progressive cement groups. The company disposes of only modern production facilities, consisting of seven cement plants, five grinding stations and nine terminals.

HCC was founded in 1907 and in 1994 became one of the first publicly listed cement companies in China. The shares are traded on the Shanghai Stock Exchange. Currently, the largest shareholders apart from Holcim are the City of Huangshi and an industrial holding company owned by the City of Huangshi with 27.1 per cent. Other state companies hold 3.9 per cent A shares while the general public holds 19 per cent of A shares and 23.9 per cent of B shares.

In 2005, HCC achieved sales of US$330m and an EBITDA of US$60m. The company has a staff of 6600. In recent years, HCC has followed a strategy of expansion, in line with the dynamic development of the Chinese building materials market. In 2006 and 2007, HCC will commission another six new kiln lines and three additional grinding stations with a combined annual cement capacity of 14Mt, bringing the total annual cement capacity to 36Mt. The company has also started to invest in ready-mix concrete in urban areas.