Sinoma seeks more production after peer takeover
Updated: 2008-09-04 07:23
By Joey Kwok(HK Edition)
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China National Materials Company (Sinoma) said yesterday it aims to become the largest cement maker in North China through acquisitions amid fierce competition on the market.
Zhou Yuxian, a director of Sinoma, said the company's production capacity will reach 32 million tons by the end of this year. The figure will increase to 72 million tons after Sinoma acquires Jidong Cement Group, a deal now in the works.
"Seventy-two million tons will definitely make us the largest cement producer in the north," Zhou said.
Zhou added that the company will also expand its cement production in the northwestern part of China, for example, in Qinghai and Gansu, to increase the company's market share.
"We will keep an eye on the market situation and continue to search for acquisition opportunities," he added.
The firm, which also produces cement-making equipment, said it will try to sell more equipment to overseas clients to cash in on emerging markets such as India, at a time the domestic demand may wane.
Sinoma, the world's largest producer of cement-making equipment, signed 29.35 billion yuan worth of new contracts in the first half of the year, up 138.7 percent year-on-year. Among them, 79 percent, or 23.18 billion yuan, were overseas contracts.
However, Wang Wei, the president of the firm, was not satisfied with the percentage.
"Our company's revenue from overseas contracts will be increasing, and not dropping," Wang said.
But an appreciating renminbi has been eating into the firm's profits from overseas sales, as the deals are usually settled with US dollars or euros.
He said the fluctuation of yuan-US dollar and US dollar-euro rates have caused a 3.6 percent drop in the gross profit margin of the firm's equipment business.
Wang, however, expected a better second half, with the yuan slowing down its appreciation pace and the euro dropping against the greenback.
Moreover, Sinoma has set fixed exchange rate with its clients to minimize the uncertainty of the exchange fluctuations.
"Since the end of last year, our company has started to lock the exchange rate for our newly-signed overseas contracts. That will help us better control the ups and downs," Wang said.
The company's first-half net profits soared 75.5 percent to 295 million yuan. Its revenue also increased 26.8 percent to 10.9 billion yuan.
The company's vice-president, Su Kui, said the costs of coal and steel have increased by 30 percent and 40 percent, respectively, and this has been hitting the firm's bottomline.
However, Sinoma has managed to combat the rising price of raw materials as its major cement plants, in Xinjiang and Ningxia, are quite close to some of the coal mines, saving it some transport costs, Su added.
(HK Edition 09/04/2008 page2)