Taiwan Cement Corp (台灣水泥) on Thursday signed a cooperation agreement with China National Building Materials Group Corp (CNBM, 中國建材集團), aiming to facilitate its expansion in China’s southwestern region, the company said yesterday.
“Our company and CNBM used to be competitors in southwestern China and bid against each other in acquisitions, decreasing the profit of both companies and slowing down our expansion,” Taiwan Cement deputy spokesman Robert Chen (陳旭川) said by telephone.
Chen said the cooperation pact will decrease competition between Taiwan Cement and CNBM, one of the companies controlled by China’s State Council and the largest cement company in China, paving the way for Taiwan Cement to expand and conduct acquisitions.
Furthermore, describing the cement market in southwestern China as over-saturated, Chen said it is beneficial for both companies if cement suppliers can integrate themselves via acquisitions, which will thus push up cement prices.
According to Chen, the Chinese government has implemented a policy to help the 10 biggest cement companies in China to control 60 percent of market share.
Taiwan Cement, the largest cement company in Taiwan, is now the sixth-largest cement company in China, he said.
Although Taiwan Cement has set a goal to achieve a production capacity of 100 million tonnes of cement in China by 2016, the new pact will reduce Taiwan Cement’s total production in China from 60 million tonnes to 55.1 million tonnes.
Under the agreement, Taiwan Cement will sell CNBM 70 percent of Sichuan Taichang Building Materials Group Co (四川泰昌) shares and 90 percent of shares in Scitus Cement Holdings Ltd’s (賽德水泥) Guizhou subsidiary for 1.11 billion yuan (US$178.16 million).
In return, CNBM will sell to Taiwan Cement 10 percent of the shares in Scitus Cement’s Sichuan subsidiary for 6.9 million yuan, allowing Taiwan Cement to have full control of the subsidiary company.
From January through September last year, Taiwan Cement reported a profit of NT$6 billion (US$206.89 million), or earnings per share of NT$1.63. The company’s revenue totaled NT$109.19 billion in the first 11 months of last year, up 0.81 percent from a year ago.
Shares of Taiwan Cement rose 0.39 percent to NT$39 yesterday on the Taiwan Stock Exchange, outperforming the main bourse, which dropped 0.39 percent. Taiwan Cement’s share price was up 11.14 percent last year, while the weighted index rose 8.87 percent.