Cement makers shrug off concern over end of QE

CHINA PLAYS::Taiwan Cement and Asia Cement are looking to benefit from stable economic growth in China, where they both have manufacturing plants

By Camaron Kao  /  Staff reporter

Sat, Jun 22, 2013 - Page 13

Demand for cement will remain strong, supported by a recovering US economy and steady growth in China, two major Taiwanese producers said yesterday at their respective shareholders’ meetings.

“The US Federal Reserve’s plan to phase out quantitative easing [QE] is an indication that the economy has recovered, which should benefit the global economy and our company in the long run,” Taiwan Cement Corp (台灣水泥) chairman Leslie Koo (辜成允) said.

The end of quantitative easing may have short-term impacts on the US stock market and affect capital flows to emerging markets, but these impacts would not last long, Koo said.

In addition, China’s urbanization plan is expected to raise cement demand in southwest China in the second half of this year, while demand in its coastal areas should remain steady, Koo said.

Taiwan Cement’s output in China last year was 41 million tonnes, compared with 8 million tonnes in Taiwan, Daiwa Capital Markets said.

During the first five months of the year, Taiwan Cement’s revenue slid 3.54 percent to NT$43.59 billion from a year ago, company data showed. Koo said revenue would recover in the second half of the year, but did not provide company guidance.

Commenting on the Chinese policy to enhance environmental protection standards for cement companies, Koo said the move would put more pressure on smaller companies.

“Taiwan Cement may benefit from this policy if some small companies exit the market,” he said.

Asia Cement Corp (亞洲水泥), the nation’s No. 2 cement maker, also does not expect the termination of the US’ quantitative easing to affect its business in the long run.

The company forecast that its revenue this year could be higher than a year ago on the back of steady growth in China and lower material costs, including coal. Last year, Asia Cement’s revenue dropped 7.15 percent to NT$64.24 billion, from 2011.

Asia Cement chairman Douglas Hsu (徐旭東) said China’s economy is likely to expand by an average of 7.5 percent over the next five years, which should be good for the company.

Asia Cement produced 23 million tonnes of cement in China last year, compared with 5 million tonnes in Taiwan.

Taiwan Cement’s shareholders yesterday approved the distribution of a cash dividend of NT$1.9, based on last year’s earnings of NT$7.73 billion, or NT$2.09 per share, while Asia Cement’s shareholders approved a cash dividend of NT$1.7 and a stock dividend of 2 percent, on earnings of NT$6.24 billion, or NT$1.93 per share.

Taiwan Cement shares fell 5.76 percent to NT$35.15 yesterday, while Asia Cement’s slid 2.09 percent to NT$35.05, underperforming the TAIEX, which fell 1.34 percent.