Asia Cement Corp (亞洲水泥), the nation’s No. 2 cement producer, said on Saturday that its China subsidiary is seeking merger and acquisition opportunities to raise its production capacity in a market primed for growth.
The company said that the subsidiary, Asia Cement (China) Holdings Corp (亞洲水泥中國控股公司), will target cement producers in China, including small and medium-sized companies in different regions, for merger and acquisition opportunities or strategic alliances to boost its competitive edge.
In early January, Asia Cement and the Chinese subsidiary signed a strategic partnership agreement with Anhui Conch Cement Group (安徽海螺水泥股份) and China Conch Venture Holdings Ltd (中國海螺創投).
Under the deal, the companies agreed to upgrade to environmentally friendly production methods and lower production costs while working together to penetrate cement markets in Taiwan, China and other countries.
In addition to mergers and acquisitions, Asia Cement (China) is gearing up for organic growth by expanding its production capacity and improving efficiency, the parent company said.
With 13 production lines in China becoming operational this year, the production capacity of the Chinese unit is expected to rise from this year’s forecast of 32 million tonnes to 40 million tonnes next year, the company said.
Its production capacity is expected to hit 50 million tonnes the year after that, the company added.
Urbanization in rural areas of China means it is likely that investment in infrastructure and the property market will continue growing, boosting the demand for cement, the company said, citing market estimates of 6 to 7 percent growth in demand this year from last year, which saw 11 percent growth year-on-year.
Last year, Asia Cement (China) posted 823 million yuan (US$135.3 million) in net profit, or earnings per share (EPS) of 0.529 yuan, up 108 percent from a year earlier, or EPS of 0.254 yuan. The growth was attributed to an increase in shipments and efforts in cost reduction.
The Chinese unit also saw its gross margin rise 5 percentage points from 2012 to 22 percent last year.
Market analysts said Asia Cement (China) is expected to contribute about NT$0.87 in EPS to its parent company for last year, up from the NT$0.4 recorded in 2012.
In the first nine months of last year, Asia Cement recorded NT$1.54 in EPS, compared with NT$1.28 registered over the same period of the previous year.