Conch full-year net profit rises 48.3%

Anhui Conch Cement Co reported a 48.3 per cent YoY increase in profit attributable to shareholders during 2013 to CNY9.38bn (US$1.5bn) from CNY6.33bn a year ago.

Turnover increased 20.75 per cent to CNY55.26bn from CNY45.77bn in 2012. In accordance with PRC Accounting Standards, the group’s revenue amounted to CNY55.3bn, a YoY increase of 20.28 per cent. 

Sales by region
Clinker and cement sales amounted to 228Mt, representing growth of 21.95 per cent YoY. Sales volumes in East and Central China increased by 19.13 and 29.94 per cent, respectively.  The South China market remained “relatively stable,” according to Conch, where it saw volumes rise by 2.91 per cent but prices declined 2.39 per cent. In West China, previously-acquired projects as well as the construction of new facilities reinforced the group’s market dominance, leading to sales volumes rising 40.17 per cent YoY.
Exports remained relatively stable, with volumes rising two per cent YoY.

Investments home and away
Last year the group produced 183Mt of clinker and 198Mt of  cement, a YoY increase of 16 and 25 per cent, respectively.

New capacity investments and acquisition activity led to additional clinker and cement production capacity of 11.6Mt and 24.3Mt, respectively, for the year. As at the end of 2013, the group’s total clinker capacity amounted to 195Mta while cement capacity reached 231Mt. Waste heat generation capabilities totaled 921MW.

Outside China, the phase 1 construction of PT Conch Cement’s 3200tpd clinker line in South Kalimantan, Indonesia, was completed with equipment installation in full swing. Moreover, at the end of last year the group signed the land purchase agreement for PT Conch Cement Indonesia’s Merak grinding station project for which it has acquired the first batch of land.

In addition, the group said in its 2013 Annual Report that it has also conducted on-site surveys and research for projects in several countries, including Vietnam and Myanmar, and carried out preliminary preparation works.

Prospects for 2014
This year, Conch expects the supply and demand situation in China to improve further. On the demand side, it says the government’s measures to facilitate urbanisation and efforts to modernise the agricultural industry will promote the construction of railways, highways, city railway transportation as well as affordable housing cement demand. As such, the group sees “steady growth" in demand "with relatively huge potential in the central and western regions."

In terms of supply, the implementation of the Guidelines on Addressing Severe Overcapacity (Guo Fa [2013] No.41) will help contain the growth of new capacity while the implementation of environmental regulations for the cement industry will accelerate the phasing out of backward capacity.

Capex
Conch's planned capex for the year amounts to approximately CNY8.5bn (excluding merger and acquisition expenditure) to be funded primarily by internal resources and supplemented mainly by bank loans. The investment will mainly be used in the construction of cement and linker lines as well as waste heat projects for Tongren Conch Panjiang Cement Co and Linxia Conch Cement Co Conch expects that clinker and cement capacity will increase by approximately 10Mta and 30Mta, respectively for the full year.