China Shanshui Cement 1H hit by lower prices

China Shanshui Cement 1H hit by lower prices
Published: 25 August 2014


China Shanshui Cement Group Ltd announced its unaudited interim results for the six months ended 30 June 2014 which saw softer demand and lower average selling prices dent profitability.
 
During the reporting period, the Group's revenue reached CNY7349m (US$1.19bn) while gross profit was CNY1534m. Profit attributable to equity shareholders amounted to CNY168m with basic earnings per share reaching CNY0.06.

During the period under review, cement sales rose six per cent YoY to 24.36Mt and shipments of commercial clinker increased by 7.3 per cent to 4.51Mt. Ready-mix concrete volumes rose significantly by 69.5 per cent to 1.64Mm3. Dispatches of high-grade cement climbed 9.8 per cent to 16.07Mt while sales of low grade cement decreased by 0.6 per cent to 8.27Mt.
 
Zhang Bin, chairman and general manager of Shanshui Cement, said that the slowdown in China's economic growth, a decrease in the growth rate of fixed assets investment, especially declining growth of investment in real estate development, led to the softening of cement demand.  Combined with overcapacity cement prices in North and Northeast China recorded "a substantial drop which resulted in a significant decrease in the company's profitability."
 
Among its main markets, the average selling price in Shandong region fell 1.3 per cent to CNY240.6/t (US$39) while in the Northeast region prices were down 9.9 per cent on average to CN246.9/t. In the Shanxi region the selling price fell by four per cent to CNY209.9/t and the Xinjiang region saw a decline of 2.2 per cent to CNY233.7/t.
 
Revenue in the Shandong region  of CNY5113m, accounted for 69.6 per cent of total sales. The Northeast represented 23 per cent of turnover, followed by Shanxi and Xingiang with five and 2.4 per cent, respectively.

During the review period, the group added new cement production capacity of 3.40Mt and new clinker production capacity of 1.02Mt by completing and acquiring production lines. As at 30 June 2014, the group had a total production capacity of 97.60Mt of cement, 46.37Mt of clinker and 16.80Mm3 of ready-mixed concrete.
 
On the outlook for the remainder of the year, Mr Zhang said: "In the second half of the year, the Chinese government has launched a series of measures to promote economic development with pertinence, including the acceleration of the construction of transportation infrastructure such as railways and roads, which will effectively boost the demand of cement. In the meantime, fixed assets investment in the entire society and investment in real estate development have obviously decreased year-on-year, thus the problem of overcapacity in the cement industry is unlikely to be solved in the short term."