China Shanshui Cement 2014 revenue reaches CNY15,596m

China Shanshui Cement 2014 revenue reaches CNY15,596m
Published: 31 March 2015


China Shanshui Cement Group Ltd, the largest cement enterprise in the Shandong and Liaoning Provinces of China, recorded sales revenue of CNY15,596m (US$2516m) for the 12 months ended 31 December 2014.

Gross profit during the year was CNY3347m while profit from operations was CNY1813m. Profit attributable to shareholders was CNY348m. The decrease in profit was mainly due to the fall of selling prices.

Zhang Bin, chairman and general manager of Shanshui Cement, said: "Due to the slowdown in China's economic growth and deceleration in the growth rate of fixed assets investment, in particular, the decline in the growth rate of investment in real estate development, the national aggregate volume in cement production only increased 1.8 per cent in 2014 as compared with the previous year. The sales revenue and profit growth of the cement industry also showed a corresponding sluggish trend."

During the year, concrete sales volumes increased by 21.2 per cent to 3.47Mm3, while that of commercial clinker increased by 6.5 per cent to 9.82Mt. Cement sales volumes fell by 0.5 per cent to 53.15Mt. High grade cement sales rose 12.5 per cent to 39.98Mt, and thesales volume of low grade cement dropped 26.4 per cent to 13.17Mt.

The average unit selling price of cement of the group was CNY235.4/t, representing a YoY decrease of CNY14.5/t or 5.8 per cent. The group's operating companies in the Shandong region recorded a sales revenue of CNY10,479m, accounting for 67.2 per cent of total revenue. Operating companies in the northeast region reported saw sales of CNY4028m, representing 25.8 per cent of total revenue. The commencement of operations for its operating companies in Shanxi will make greater contributions to the group's sales revenue, the company highlighted.

Through establishing nine new production lines and acquiring two production facilities, the Group added both new cement and clinker production capacity (including production lines in test run) of 8.4Mta and 3.58Mt, respectively. As at the end of 2014, the total capacity of the group's commercial concrete production lines amounted to 18.4Mm3; all suitable clinker production lines had been equipped with residual heat generation facilities, and the total installed capacity amounted to 247MW. As more new projects commence operations, the Group is further strengthening its position and standing out in the cement markets in Shandong, Liaoning and Shanxi provinces, as well as in eastern Inner Mongolia and the Kashi region of Xinjiang, it added.

The Group has implemented strict measures to control costs and expenses. During the year, the proportion of the Group's total cost of sales to revenue was 78.5 per cent, representing a YoY increase of 1.7 percentage points. Of which, the proportion of raw materials costs to revenue was 26.4 per cent, an increase of 0.9 percentage points over last year. The proportion of coal costs to revenue was 20.1 per cent, remaining flat over last year. The group's average unit purchase price of coal in 2014 decreased by 9.2 per cent year on year to CNY521.2/t As for cost reduction, output of residual heat power generation was 1178mkWh in 2014, thus reducing the cost of clinker by RMB429 million.

Looking at the operating environment in 2015, Mr. Zhang believes that the increase of infrastructure investment by the government will boost demand in cement. On the other hand, the imposition of more stringent emission standards in the cement industry, the rise in environmental compliance costs, and the gradual elimination of low-end cement products will speed up the elimination of obsolete production capacity. This will in turn facilitate industry consolidation, further increase market concentration, and gradually resolve the imbalance of supply and demand in the cement market as the competitive advantages of large enterprises will become more apparent.

Mr. Zhang concluded: "Shanshui Cement will further consolidate its market share in core regions, stabilize the price of cement, optimize centralized procurement and supply systems in order to effectively reduce the costs and enhance operational efficiency. We will spare no effort to maintain the healthy development of the Group and strive for fruitful returns for our investors to reward their continued trust and support."