Taiwan Cement Corp (台灣水泥), the nation’s largest cement maker, yesterday said it plans to ship 11 million tonnes of products in the first quarter of next year — a 2 percent increase from the same period this year — on the back of recovering demand in China.
“We have seen strong growth momentum in China’s infrastructure and residential property sectors this year, while the momentum is expected to extend into next year,” Taiwan Cement senior vice president Edward Huang (黃健強) said by telephone.
During the first three quarters of this year, the company shipped 39 million tonnes of cement to China, a 10 percent increase compared with the same period last year.
The first quarter is generally seen as a slow season for cement makers in China, due to fewer working days because of the Lunar New Year holidays, but the company not only has a positive forecast for shipments, but it is also upbeat about the average selling price for cement in the Chinese market.
The company’s experience shows that cement prices in China usually plunge after the Lunar New Year holidays, but Beijing’s efforts to curb overcapacity problems in China’s cement industry are expected to ensure stable prices over that time, Huang said.
The company’s cement business in China is expected to see an increase in profitability in the next two years, with a compound annual growth rate of 67 percent, Macquarie analyst Benson Pan said in a client note on Nov. 23.
Cement’s average selling price in China’s Guangdong and Guangxi provinces surged by between 60 yuan and 70 yuan (US$8.7 and US$10.2) per tonne since September on the back of strong infrastructure demand and low inventory levels, Pan said.
Taiwan Cement might continue to see its gross profit increase in southern China, where overcapacity is less severe, Pan said.
In the first three quarters, Taiwan Cement saw its net profit increase 13.7 percent to NT$4.5 billion (US$ 141.1 million) year-on-year, or earnings per share of NT$1.23.
Gross margin improved by 3.83 percentage points to 18.42 percent in the first three quarters compared with 14.59 percent the same time last year, a company filing with the Taiwan Stock Exchange showed.
Huang attributed the growth to improving cement prices since the third quarter and lower coal costs in the same period, with coal accounting for nearly 30 percent of the company’s overall expenditure.
During the same period, combined revenue dropped 8.8 percent annually to NT$63 billion, the filing showed.
Taiwan Cement shares gained 0.27 percent to close at NT$37.05 yesterday, outperforming the benchmark TAIEX, which rose 0.14 percent to 9,263.89 points.
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