Taiwan Cement bullish on industry consolidation in China
Taiwan News, Staff Writer
2014-07-08 11:27 AM

Taiwan Cement (1101) subsidiary TCC International Holdings Limited announced a profit alert Monday for the first half of 2014. Initial board of director’s statistics indicates significant year-on-year growth. Taiwan Cement has not formally signed off on the earnings report so has yet to published figures. However, TCC International’s shipment volume for the first half of the year grew nearly 10%. The market forecasts double digit profit growth.

TCC International indicated, average cement prices this year were higher than the first half of 2013. At the same time coal cost fell, helping to push profit margins higher. TCC International expects to publish its semi-annual report on August 12.

Taiwan Cement stated, the cement shipment volume of its mainland business for the first half of 2014 was approximately 22.5 million metric tons, growing 10% annually. April shipment volume was 4.69 million metric tons, setting a new single month record. Even though prices remained high, shipment volume in June fell to 3.8 million metric tons due to rain.

China is aggressively promoting infrastructure, accelerating the construction of guaranteed housing, and eliminating obsolete cement plants. China’s State Council has mandated a carbon reduction target for cement production. In Taiwan Cement’s production centers of Guangdong and Guangxi, a total of 65.60 million metric tons of production must either withdraw from the market or increase denitrification capacity.

There are a large number of small plants in Guangdong. Under the central government’s new policy, small and midsized plants only have two alternatives. One, buy additional denitrification equipment or, two, withdraw from the market and sell plant and equipment to large cement manufacturers. According to reports, denitrification equipment is expensive and beyond the means of average small plants. Thus, Taiwan Cement expects a wave of mergers. The company also believes this consolidation trend in China’s cement market will aid profit performance.

In terms of pricing, Q1 2014 continued the momentum started in Q4 2013 with price per ton of cement in the Guangdong region falling between RMB 360 and RMB 370. In Q2, Taiwan Cement raised prices approximately 5% to 7% with overall average pricing growing 15% to 20% year-on-year, contributing to profit performance.

Looking to the latter half of the year, Taiwan Cement stated, as rains abate in July, the market is expected to recover momentum with prices rebounding in August and September. At the same time the second production line of the company’s Guizhou Kaili plant will begin production in October of this year with annual capacity of approximately 2 million metric tons. This will increase Taiwan Cement’s total capacity in China to 57 million metric tons annually. Overall, revenue performance in Q3 will be steady with the traditional peak season arriving in Q4. Performance in the latter half of the year will surpass the first half.

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