China Resources (CR) Cement, a unit of state-controlled conglomerate China Resources (Holdings), plans to invest HK$1.8bn to boost capacity over the next three years, despite profits plunging 85 per cent last year amid high costs.  

CR Cement said Friday net profit dropped to HK$125.3m  last year from a restated HK$82.4m  in 2004, mainly because of higher production costs and lower selling prices.  It didn’t propose any dividend for last year, breaking a promise in its 2003 initial public offering that it plans to pay 20 per cent to 25 percent of earnings as dividends each year.  
 
The company plans to raise cement capacity to 15Mt a year from 7.7Mt by 2008, while boosting concrete capacity to 10Mm3 a year from 4.4 Mm3. It has budgeted HK$1.8bn  as capital spending from this year to 2008, which will be funded mainly by bank borrowings.  
 
CR Cement had net cash of HK$220m  as of the end of December, with its net gearing ratio standing at 189 per cent. The ratio will jump to 250 per cent at the end of this year, Shi said. Although the mainland is keeping its measures to slow real estate development, CR Cement said it is confident the next few years is the right time for expansion.  

CR sold 3.4Mt of cement and 2.46Mm3 of concrete last year.  The company’s gross margin dropped to 19.7 per cent last year from 26.1 per cent in 2004 due to a 29 per cent increase in coal purchase prices.  CR Cement’s shares slumped 4.29 per cent, or six HK cents, to close at HK$1.34 Friday before the earnings report.  Source : The HK Standard.