TCC International reports 38% rise in revenues

TCC International reports 38% rise in revenues
Published: 26 March 2012


TCC International Holdings Limited together with its subsidiaries reported a 38.6 per cent rise in revenues on the back of exceptionally strong demand during the low season in the first half of 2011 and increase in product average selling price. For 2012, it plans to consolidate its position further through organic and vertical integration.

Revenue increased from HK$8.1bn (US$1bn) in 2010 to HK$11.26bn in 2011 while net profit reached HK$2.88bn from HK$1.53bn the year before.

The group's aggressive expansion over the past few years, through organic growth as well as merger and acquisition, has established for it an operation portfolio spanning over nine provinces and one municipality.  Last year, TCC achieved a 20 per cent growth in sales amounting to 34.2Mt.

During the year, Southern China region remained a major contributor to the Group's performance both in terms of sales and profit. Sales were 22.1Mt, which remained basically the same as that of last year and comprised plants in Guangdong and Guangxi provinces. The Group's two major facilities in Yingde, Guangdong, namely TCC Yingde Cement Co and Yingde Dragon Mountain Cement Co generated sales of 14.6Mt, or over 40 per cent of the Group's total volumes. The company said that its 25 per cent minority interests in Prosperity Conch Cement Co in Yingde continued to :generate a favourable return” while sales from the Guangxi plant amounted to approximately 7.5Mt – similar to the level achieved last year.
   
In the Eastern China region, despite minimal change in the sales volume at the Jurong plant, a 36 per cent YoY increase in average cement prices and improved cost efficiency contributed to significant upsurge in the plant's profit during the year. The rise in prices was supported by vibrant development of both public and private sector projects and severe restriction in electricity supply. Performance of the Fuzhou plant also benefited from high average prices and favourable demand in the region. For 2011, the Group's Eastern China operations generated a sales volume of 5.6Mt.

The Group's operations in Southwestern region comprised facilities in Chongqing, Sichuan and Guizhou provinces, as well as minority interests in two Yunnan cement plants. The two production lines in Chongqing, with one operating in full for the year, and the other only start running in the4Q11, generated sales of 2.4Mt during the year However, the Chongqing plant's cement average price was under pressure from new capacity launched in Chongqing and Sichuan and influx of excess supply from the surrounding areas. As a result, the Chongqing plant reported an insignificant profit during the year.

With the Guangan plant in Sichuan province only having been inaugurated for less than six months and also suffering from from price competition, the plant generated a total sales volume of 830,000t and reported a minimal loss for the year under review.

The group's Guizhou operations, which comprised two production lines in 2011, reported a total sales volume of 804,000t, as one production line became operational only in July 2011, while the other one was still under construction during the year.

To strengthen its position in Guizhou, the Group acquired two additional production lines with capacities of 1Mta and 1.2Mta respectively during the year. These smaller plants are designed to service the highly segregated local markets over the mountainous terrain of the province.

During 2011, the Group's Liaoning plant in North eastern China sold a total of approximately 1.9Mt of cement and clinker, and generated a good profit, as opposed to a minimal loss in the previous year. The satisfactory results were mainly attributable to high cost efficiency, an over 50 per cent increase in cement average selling price and effective regulation of supply in response to a stable market demand.

Commenting on the outlook for 2012 business performance, Mr Koo, Cheng-Yun, Leslie, Chairman of TCCIH, said: "Certain of the Group's newly completed/acquired production lines are going to book their first full year results into the Group's consolidated accounts in the current financial year, and will thus further reinforce the Group's income base. On top of these additional facilities, the Group has completed the acquisition of controlling interests in six cement plants spreading over Guizhou and Sichuan provinces in January 2012.”

In terms of expansion, on the organic front, the group has entered into an agreement with the local government for the development of a large scale cement production base at Shaoguan city in the northern part of Guangdong province. The plan, which is subject to approval, will complement the group's existing facilities in Guangdong and consolidate its dominant position in the province.

To achieve vertical integration, the group announced the acquisition of three companies providing limestone quarrying service to its subsidiaries in Yingde, Guigang and Jurong respectively. The transaction allows the group to lower raw material costs through extending its operation to limestone quarrying.