West China Cement Ltd has reported a rise in net profit and operating revenue for 2012 and says it expects an improved operating environment going forward due in part to increased infrastructure demand.
Net profit for the group jumped 44.9 per cent YoY in 2012 to CNY360m in 2012 and operating revenue grow 10.5 per cent YoY to CNY3.52bn. Cement sales volumes grew by 28 per cent, including sales from the newly constructed Danfeng Line 2 Plant during its trial production period, compared to 2011.
The Shifeng Cement Plant and the Fuping Cement Plant acquisitions were particularly significant in extending the group’s core market reach in eastern Shaanxi Province. Outside of Shaanxi Province, the group completed the construction of the 2Mta cement capacity Yutian Plant in Hotan, Xinjiang Province in 2H12, taking total group capacity to 23.7Mta.
Going forward, West China Cement expects the recovery in infrastructure demand seen in the second half of 2012 to continue into 2013. The 2H12 saw the resumption of a number of important railway and expressway projects and the group expects to see increased sales of high grade cement into these projects in 2013. It expects to supply up to 300,000tpa for the next four years into the Xi’an to Hefei Double Track Railway project which commenced construction in 4Q12. It expects the Xi’an to Chengdu High Speed Railway to commence construction in 2013, with estimated total consumption of approximately 4.5Mt within Shaanxi Province. Along with other projects that have commenced or re-started, the Group expects this incremental demand to raise capacity utilization to between 80–90% for the group as a whole.
Whilst 2012 saw slowdown in government spending in China as a whole, the “Western Development Policy” of the 12th Five-Year Plan and the “Guanzhong-Tianshui Economic Zone” have remained key development priorities for the PRC Government and the Group expects further resumption of infrastructure projects in the province in 2013. The group expects this development to increasingly focus on industrialisation and urbanisation, including the development of tertiary cities, in 2013 and expects this development to become an increasingly important demand driver over the remaining years of the 12th Five-Year Plan. The “Western Development Policy” also remains significant in terms of the group’s strategic move into Xinjiang Province in the far west of China.
Whilst West China Cement continues its growth target, the company said it will shift its priorities in 2013 to reducing its net debt levels with a target of repayment of the USD Senior note in January 2016.
