HK Chia Hsin Cement 2004 Net Falls significantly

Hong Kong-listed Chia Hsin Cement Greater China Holdings Corp said Tuesday its 2004 net profit fell 22 per cent from a year earlier, on lower Chinese cement prices despite rising raw material costs.  Net profit for the year ended Dec 31, 2004 totaled US$14.7m, or 1.3 US cents per share, down from US$19.0m, or 2.1 US cents per share in the previous year. Revenue rose slightly to US$81.9m from US$78.0m. 

Chia Hsin Chief Executive Jason Chang told a news conference that a steep decline in Chinese cement prices in the second half contributed to the profit fall.  Weaker cement prices were the result of Beijing’s efforts to cool its economy last year, Chang said. 

Last August, Chang said he expected cement prices to rise in the second half, after they fell sharply from May to July. Instead, prices continued to slide in the final months of the year, as supply continued to outstrip demand.  Chia Hsin said cement prices in China fell to an average of CNY247 per ton in the second half, compared with CNY304 in the first half.  A 14 per cent surge in coal prices and a five per cent rise in electricity costs also trimmed the company’s profits, the company said. 

For the first half of this year, Chang expects slightly higher cement prices. ’But market supply will still be higher than demand,’ he said, adding raw material prices are also expected to continue rising due to a shortage in coal and electric supply. 

Chang said Chia Hsin will turn to exports this year as a new source of earnings growth. With higher profit margins, exports will help diversify the company’s revenue base.  To meet an expected rise in exports, the company said that its production capacity will increase 44 per cent on year to 4Mt by the end of 2005.