Conch Group’s aggregate capacity will exceed 40 million tons by the end of 2018 and reach 100 millio

Byzengjiaming12

Updated Mon, 11 Jun 2018 18:11:12 GMT


海螺水泥

A few days ago, general manager of Conch Group, said there is a trend that rising prices of building materials acts as an upward pressure on building cost. But cement cost is only a fraction of the building material cost, the rises of sand gravel aggregate is much bigger. In aggregate industry, Conch Group makes the most of mineral resource, cyclic utilization and cost minimization and cleanest, which lead to strong competitive strengths. At present, Conch Group’s aggregate capacity will approach 40~45 million tons by the end of 2018, and reach 50~60 million tons by the end of 2019, and realize 100 million tons by 2020.

Looking back the rapid growth in the whole industry in the last 20 years, at first was to take position, recent years, owing to the off-peak production and environment supervision which make the improvement of supply and demand relationship, companies has a preferable economic returns. Also, benefits from the strong enhancement of industry self-discipline, the entire market is in a relatively healthy condition. At the recent stockholders’ meeting, conch group’s vice-president Wang Jianchao showed that cutting output in the whole industry win the time for cutting overcapacity.

From the view of the cement industry leader Conch Group, cement price is expected to hold up recovery growth along with the continuous improvement of supply side, the industry status will be better in 2018. At this stockholders’ meeting, conch group’s management answered the questions like cement price and the industry situation, capacity expansion at home and abroad, dividend of listed company and so on.

Recovery Growth of Cement Price

In 2017, Conch Group achieved remarkable performance. Revenue of 75.311 billion for the whole year, up 34.65% on a year-over-year basis, net profits reach 15.855 billion, an increase of 85.87%. In the first quarter which is traditional considered as cement industry’s off-season, it still achieve revenue of 18.767 billion, with year-on-year growth of 37.59%, net profits reach 4.778 billion, an increase of 1.2 times on a year-over-year basis, beyond market expectation.

In the eyes of the general manager Wu Bin, the core problem of the industry is supply-demand relationship. A co-ordination of supply and demand market is the fundamental underpinning for stable cement price. From the present demand side, infrastructure’s total investment scale including railway, water conservancy construction, has not declined. Based on the situation of real estate development and land transaction, real estate construction is also relative stable. From the supply side, along with the advance of supply-side reform and off-peak production, cement overcapacity worst-hit area like northeast, northwest and North China, their volume of cement supply is relative declining

Therefore, although the demand off-season June to August is coming soon, the positive trend in cement industry is still expected to continue. Wu Bin considered that the market demand will declined by 10%-15% in off-season, but the production yield initiative in supply-side will increase, off-peak production in Shandong, Henan, Jiangsu will be implemented 20-30 days, that may cut output by 10-15% basically. Owing to the two factories short supply and low cement stock, the stability of cement price in this year’s June to August will better than last year, the whole year situation also will be better than last year.

Inevitably, the industry still has awkward places in cutting overcapacity by adopting capacity dormancy through off-peak production to instead capacity exit. Wang Jianchao pointed out that the annual cement demand in China is about 2.4 billion tons, the existing cement clinker capacity is still surplus, so that it still need to be weeded out by the market. That is a slow process.

Fortunately, China’s big cement enterprises led by Conch, BBMG, and CNBM take the responsibility of leading the industry to be self-discipline, and make the whole market in a relatively healthy state. Wang Jianchao said that current cutting output supply time for cutting overcapacity. Later we can consider ways in how to cutting overcapacity through cutting overcapacity fund, emissions trading of pollutants and greenhouse gases, abolishing all 325# cement and so on. In future, in the situation of excess cement enterprises, big enterprises will utilize re-collectivization and cooperation and backward productivity to tide over the difficulties together.

From the industry situation, big enterprises with pricing power have already become the main force to stabilize the domestic cement market. Although there are voices of concerns about the behavior of the alleged cement price fixing, Conch believe that it does not. First, cement price is very low in the end of 2015 and the beginning of 2016, so that the big area losses of the industry appeared. Now it is just recovery growth. Next, industry prices need to make up the factor of rising cost, coal, electric power, raw material, financial costs, environmental costs are all rising, and unit depreciation which brought by off-peak production is higher.

Wang Jianchao said there is a trend that rising prices of building materials acts as an upward pressure on building cost. But cement cost is only a fraction of the building material cost, the rises of sand gravel aggregate is much bigger. He claimed that Conch and some other companies will take the lead of social responsibility, in order to maintain market stability and encourage the sustainable development of the cement industry.

Deep Ploughing Cement Industrial Chain

Chairman of the Conch Group Gao Dengbang described the current situation through the view that the industrial structure and quality is in better development. He considered that the market demand of infrastructure construction will possibly in the long run, but the price system of China cement is different, comparing with other countries in One Belt and One Road or areas like Taiwan, it still has room for improvement and it will approach international cement price slowly. From the other aspect, now the emission from the production including nitrogen oxides, sulfur dioxide and dust all have achieved or even exceeded the national standard, as national demands for clean has become more advanced, supply-side reform will also drive for supply side improvement.

Conch Group has revealed that they plan to control added 50 million tons cement capacity in China by merger and acquisition and added 50 million tons capacity over the seas through OBRO from 2016 to 2020.

Therefore, Conch Group will continue a series of capital investments. Chief accountant and secretary of the Board Zhou Bo showed that the industry association plan to make the top10 cement enterprises’ market up to 60% before 2020, the whole industry has room for merger and integration. In the other side, Conch hopes to keep the spirit of craftsman, which is do well in upstream and downstream industry chain and to be more professional. And integrated industry chain can be improved by increasing the investments in technical transformation and environment. All of these require capital expenditure.

Although the total amounts of dividends have already exceeded the total amount of direct financing since it’s launched, Zhou Bo announced that considering the increase in capital expenditure, Conch will increase dividend space. “If A shares could focus more on value discovery, share price and dividend will have better relevancy, company also will be motivated”, he said.

By virtue of Ploughing deeply in cement industrial chain, Conch has overwhelming superiority by owning tens of billions tons of mineral resource. And it also expanded in the relative business, for example, sand gravel aggregate, commercial concrete and so on. Conch has started to adopt the way of co-invest with local city investment companies to kick the tires in the concrete industry. They have signed several commercial concrete projects in areas including Zunyi, Guangyuan, Bazhong.

“Commercial concrete industry is a perfect competitive industry and it’s in a serious over-capacity situation”, Wu Bin said. Conch Group went into this industry in order to change the problems like mismanagement, long payment days and hope to break the original commercial model and rules. In aggregate industry, Conch Group makes the most of mineral resource, cyclic utilization and cost minimization and cleanest, which lead to strong competitive strengths. At present, Conch Group’s aggregate capacity will approach 40~45 million tons by the end of 2018, and reach 50~60 million tons by the end of 2019, and realize 100 million tons by 2020.