Profits surge at Anhui Conch

Anhui Conch Cement, China’s largest cement producer by sales and production volume, said first-half net profit rose by more than 2.5 times as prices surged on the back of the country’s property boom.  Net profits jumped to CNY794m (HK$748.5 million), or 0.63 yuan a share, in the first six months, from CNY223.7m a year earlier. Revenue rose 79 per cent to CNY3.79bn. It did not propose an interim dividend.

The company claims to have sold 15Mt of cement in the first half of 2004, representing a year-on-year increase of 32 per cent. Average unit prices surged 35.5 per cent, which widened the gross profit margin by 11 percentage points to 48 per cent amid cost control.  The company’s continued efforts to rationalise market distribution and to develop marketing networks are paying off to ensure steady increases in the group’s sales volume and product prices,’’ Anhui Conch said.

Investment in China’s construction industry jumped 93.4 per cent in the first quarter this year from a year ago to CNY4.3bn, according to the China Real Estate Association. The real estate boom helped push the country’s cement output 18.9 per cent higher to 862Mt.

Chia Hsin Cement Greater China said it raised its product prices 10 per cent at the end of July in response to strong domestic demand. The net operating revenue of its subsidiary, Chia Hsin Jingyang, Cement was CNY50.9m, bringing the accumulative operating revenue to CNY415.8m this year.

Analysts expect further upside for cement prices, which may see Anhui Conch’s earnings expand. “We expect prices of cement will rise by 5-10 per cent in the third quarter when it is a high season for the industry. Anhui Conch can benefit since its high-end cement is in demand,’’ Sun Hung Kai research analyst Oscar Choi said.

Jiangsu province remained Anhui Conch’s biggest market, accounting for 31 per cent of total sales in the first half, followed by Zhejiang and Shanghai.  The implementation of [the central government’s] austerity measures [to slow down the economy] is expected to result in gradual elimination of low-capacity cement plant,’’ Anhui Conch said.  Sales of high-grade cement accounted for 51 per cent of the company’s total sales value, an increase of 8 percentage points.