Shanshui Cement 1H hit by pricing pressures

China Shanshui Cement said it expects to record a significant YoY decrease in net profit for the six months ended 30 June 2013 of not less than 40 per cent due to to persistently lower prices.

Since the start of this year, the Shandong region (one of the company’s core markets) have been affected by excess production capacity and prices have remained from the fourth quarter of 2012. Demand has also slowed in the northeast region due to weather-related issues, and sales prices have failed to reach expected levels and remained lower than that of recent years.

Earlier this week, Credit Suisse lowered its target price for China Shanshui Cement to HK$4.2 from HK$5.5, and maintained its "neutral" call. The house expects unit gross profit to soften in 2013 to CNY65/t due to moderate supply pressure in Shandong, combined with depressed margins in Shanxi and Xinjiang (13 per cent of 2013 sales).

Shanshui Cement, , which is the largest cement producer in Shandong and Liaoning Provinces, achieved a revenue of CNY16,161m, a profit of CNY3,099m and a gross profit of CNY4,111m last year.