Cement giant holds talks on CNY700m long-term loan

Cement giant holds talks on CNY700m long-term loan
Published: 12 September 2005

Anhui Conch Cement, China’s largest cement producer, is in talks to secure a long-term loan of CNY600-700m (HK$576-HK$672m), the company said.

“The loan will soon be approved, said Zhang Mingjing, the secretary of board of directors, at a forum organized by BNP Paribas. She did not elaborate on the use of the loan.

The government has taken measures since last year to curb the growth of the cement industry, including loan tightening, in efforts to prevent the economy from overheating.

Despite the company’s warning of more than a 50 percent drop in its profit in the first three quarters, Zhang expects the gross margin to continue to pick up in the third quarter. “It is because the coal price has started to fall since the beginning of August, and our product prices will rebound,” she said.

The company’s gross margin surged to 22 per cent in the second quarter, after hitting 17 per cent in the first quarter.

The rise in the prices of its products will be tiny, Zhang said. “But the impact on our earnings is significant because we sell four to five million tonnes [of cement and clinker] per month,’’ she said.

The company aims at reaching sales volume of 45Mt in 2005. It says its margin can be further improved, as exports with a gross margin of 30 per cent increase.

Anhui Conch targets increasing overseas sales, mainly to Southeast Asia, North America and the Middle East, to 5Mt this year, from 1Mt in 2004.

Although it sold 66 percent more cement at 24.2Mt in the first half, the cement maker earned only CNY91.4m, an 88.5 per cent
YoY plunge, as higher costs eroded profits. Energy accounts for 65 percent of the company’s total expenditures. During the first six months, cost of coal and electricity made up 41 per cent and 24 percent, respectively, of the Anhui-based company’s expense.