CRH to purchase cement plant in northeast China

CRH to purchase cement plant in northeast China
11 October 2006

CRH said yesterday it had agreed to buy a cement plant in Harbin in northeast China. The move comes after a lengthy period of testing the market, reports the Irish Times.

CRH gave no financial details for its latest deal, but said that the Harbin Sanling plant in Heilongjiang province produced 650,000tpa of cement.

A move into the booming Chinese market has been long anticipated, particularly into a market where massive urban redevelopment is taking place.

CRH already has some minor interests in China through companies it has bought with Chinese interests.But all eyes have been on this first real, significant deal.

CRH acquisition hunters have been scouting China’s major cities, including Beijing and Shanghai. Many of the country’s cities are reaching saturation point, however, and CRH’s focus has increasingly been on the second-tier cities, large conurbations with development plans which are not already overrun with foreign building suppliers. Harbin has a population of nine million.

The plant is located in Xiaoling, a town approximately 45km southeast of the city, which is the largest in the province of Heilongjiang.

CRH’s finance director Myles Lee said the company was keen to find the right target before moving into the China market.

"It’s a toe in the water. We identified Harbin as a place which hadn’t seen lots of development by foreign cement companies," said Mr Lee.

"We’ve been looking intensively in China over the past three years as part of our development strategy, focusing on the heavy end of the business, cement manufacturing," he said.

CRH is famously acquisitive and its strategic approach has made it one of the world’s four biggest suppliers to the building industry. The company has to date largely focused on the developed world, but it has successfully entered markets in the former communist countries of central Europe. Caution was the watchword when it comes to China, the company said.

"This is step one. We’ll get familiar with the market and see what opportunities develop," Mr Lee said.

"We are cautious and believe in a gradual approach and we’ll see how it develops. Some of our peers have been more aggressive, but this is our traditional approach.

"Our development people have been putting in a lot of time and a lot of legwork into this market," he added.

The Harbin move is expected to close in the coming months, subject to government approval and the satisfaction of certain preconditions, the company added.

CRH described Harbin Sanling as a modern plant with two clinker production lines. In August, CRH announced its biggest ever deal with the 1 billion purchase of Ashland Paving and Construction (APAC) in the US.

Chief executive Liam O’Mahony said in a statement the proposed deal "represents an excellent opportunity for CRH to enter and participate in the large and growing Chinese building materials market".

Published under Cement News