Asia Cement Corp (亞洲水泥), the nation’s No. 2 cement maker, said on Wednesday that shipments from its Chinese operation will rise around 50 percent this quarter from a quarter ago, benefiting from two new production lines in Sichuan Province.
Shipments of the company’s Chinese subsidiary, Asia Cement (China) Holdings Corp (亞泥中國), are expected to increase to 8 million tonnes this quarter, compared with 5.29 million tonnes a quarter ago, after the subsidiary completed acquisition of two production lines of Sichuan Lanfeng Cement Co (四川蘭豐水泥) yesterday, the company said.
Asia Cement (China) announced on April 16 plans to take over Sichuan Lanfeng Cement in a 2 billion yuan (US$319.52 million) deal that included its two production lines with a combined capacity of 5 million tonnes a year.
“Upon the completion of the acquisition, Sichuan Lanfeng will become a wholly owned subsidiary of Sichuan Yadong,” Asia Cement (China) said at the time in a filing with the Hong Kong Stock Exchange.
Asia Cement (China) intends to increase its annual capacity to 40 million tonnes next year and 50 million tonnes in 2016, the firm said.
In Taiwan, the company has an annual capacity of 5.5 million tonnes, it said.
On Wednesday, Asia Cement (China) reported net profit of 125.7 million yuan for last quarter, up about 14 times from 7.48 million yuan a year ago, while revenue increased 21 percent to 1.6 billion yuan from 1.33 billion yuan a year ago on the back of increased capacity.
Asia Cement holds a 72 percent stake in Asia Cement (China) and derives more than half of its revenue from the Chinese unit’s operations.
The latest acquisition is expected to increase the capacity of Asia Cement (China) by 16.67 percent to 35 million tonnes a year, from 30 million tonnes, an Asia Cement official who declined to be named said over the telephone on Wednesday.
The official attributed the subsidiary’s profit growth to an increase in gross margin to 24 percent last quarter from 11 percent a year earlier, citing rising product prices and declining raw material costs for coal.
He said Beijing’s determination to ease cement oversupply in China has helped push up average selling prices of Asia Cement (China) products.
“China’s government has been raising environmental standards for existing cement factories, while blocking new licenses,” he said.
Meanwhile, coal prices were down by between 40 yuan and 50 yuan per tonne last quarter from 330 yuan to 350 yuan per tonne the previous year, he added.
For this year, Asia Cement is optimistic about the market demand and cement prices in China, expecting coal price to remain stable in the short term, the official said.
The company forecast that total cement demand in China would rise between 6 and 8 percent this year, he said.
Last month, Credit Suisse AG said the deal would allow Asia Cement (China) to become the largest cement producer in Chengdu, China, with a market share of up to 45 percent.
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