China's Anhui Conch Cement to add to capacity through acquisitions
China-based Anhui Conch Cement Co said it intends to add up to 30 million metric tons to its capacity through acquisitions in the midst of a move by the government to consolidate production, Bloomberg reported. Anhui Conch is the biggest cement producer in China in terms of market value.
In an interview, the company's Executive Director Guo Jingbin told Bloomberg, "Almost all the big cement producers are buying. Our direction will lean toward acquisitions in the next few years and we have sufficient funds."
As the Chinese government looks to lower emissions in order to protect the environment, it is looking to put a cap on the building of new factories. As such Anhui Conch and its peers will need to purchase assets if they want to expand. Guo said the demand for cement to construct subways and roads may improve in 2014 as the projects which were approved in 2012 have finally been begun.
Two years ago, the Chinese government unveiled plans to construct roads stretching 2,018 kilometers as well as subway projects in 18 cities in order to ramp up its stimulus efforts in a bid to bolster economic growth. Guo said work on many of the projects could begin this year.
An increase of 30 million tons would be equal to 14.4% of the cement maker's 2012 capacity of 209 million tons, the report said. Bloomberg data showed that the Anhui Conch had cash amounting to CNY 10.3 billion or $1.7 billion as of the end of September last year. For the same period, the company had a total debt of CNY 23 billion.
BNP Paribas Securities Asia Analyst Rachel Cheung told Bloomberg, "Because their balance sheet is so strong, they can acquire something really big. Maybe like one of the top 20 cement players." She added that the market share of China's ten largest producers went up from 12% in 2007 to 32% in 2012 and will continue to grow.