Anhui Conch Cement 1H15 results in line with Moody’s rating

Byjirong

Updated Thu, 10 Sep 2015 16:47:35 GMT

Moody’s Investors Service has confirmed that Anhui Conch Cement Company Limited’s 1H15 results are in line with its A3 rating and stable outlook. The company reported a 15.8% decline in revenue in 1H15 to RMB24.2 billion, driven by a 16.44% decline in cement prices, attributed to slowing demand and oversupply.

"Conch's strengthened market position and maintenance of low debt leverage in 1H 2015 continue to support its A3 rating, despite the pressures from industry overcapacity and the slowdown in infrastructure and property developments," said Franco Leung, a Moody's Vice President and Senior Analyst.

Lower raw material costs and other cost reduction efforts could not offset the decrease in cement prices, which led to a decline in Conch’s gross margin to 27.2% in 1H15 from 33.2% in 1H14. However, Moody’s points out that this is still above industry average. Margin recovery will be limited, according to Moody’s expectations, but the likely removal of outdated production capacity will benefit leaders in the industry such as Conch.

Conch’s market share is estimated at about 11% in 1H15, up 1% from 1H14, and sales volumes were up 1.6% y/y in an environment in which national production volume fell 5.3% y/y.

"Despite the weakened level of earnings, Moody's expects debt leverage over the next 12 months to remain consistent with its standalone credit profile," says Jiming Zou, a Moody's Vice President and Senior Analyst, and Local Analyst for Conch.