Chia Hsin Cement to triple capacity

Chia Hsin Cement Greater China Holding Corp plans to more than triple cement production capacity by 2006, in part by acquiring producers hurt by China’s macroeconomic controls, an executive said.  The current tightening ’has actually opened up a huge window for acquisition opportunities,’ Executive Director Elizabeth L Wang told Dow Jones Newswires in an interview.  ’If the tightening measures don’t loosen, then those targets’ financial situations only get more and more difficult. Then we would have more bargaining power,’ she said.

The Hong-Kong listed company may spend US$10m to expand its sales network, and an unspecified amount to acquire stakes in cement companies, Wang said.  Chia Hsin is looking to expand its sales and production in the northern and southern coastal areas from its sales base in the central Yangtze River Delta region. The company’s production base is in China.  The company aims to raise annual production capacity to at least 10Mt by the end of 2006, from about 3Mt currently, Wang said.  Chia Hsin has passed government environmental and financial inspections, Wang also said.

Local media reported this month an official at the agency in charge of China’s state-owned companies saying that overinvestment in China’s cement manufacturing sector is creating a ’potential crisis’ for the industry.  China’s investment crackdown has weakened cement demand from makers of ’ready-mix’ concrete - which is often used in real-estate projects, she added.  ’The real-estate side has been hit, that’s pretty clear. From that you can see the ready-mix concrete business faced really, really tough times’ from March to May, Wang said.  As a result, Chia Hsin plans to increase cement sales to government infrastructure projects such as highways and bridges to 30% of its total sales in the next 12 months, up from about 20% in September, and 15% at end-2003.

Looking ahead, Chia Hsin aims to export 20% of its product by the end of 2006, up from less than 1% currently. The company is considering exporting more to Taiwan, Japan and the US. The ultimate goal is to diversify risk,’ she said.

China now has 4000 to 4500 cement producers, down from more than 9000 in the early 1990s, Wang said.  ’As a foreign player and looking at the trend, we see the market will be consolidating and going toward high-grade cement,’ Wang said.

Market share of China’s top 10 cement manufacturers was 11.4% in the first half of 2004, a Chia Hsin document citing China Construction Material Association data shows. Lafarge said this month it plans to double capacity at two of its plants in China to meet strong demand.  Anhui Conch Cement is now the largest cement maker in China’s fragmented market.

Chia Hsin’s first-half profit jumped 81% to US$12.3 million from the previous year, spurred by China’s rapid economic growth. Its revenue rose 25% to US$44.1 million over the same period. But Chia Hsin’s profitability in the second half may be ’slightly weaker’ than in the first half, Wang said.