Along with the rapid development of China economy, the fast increase of fixed assets investment promoted the recovery of cement demand and price increase, and the reform of industry structure and market structure made the periodical expense rate drop. The both two drove the recovery of the industry prosperity finally. The accumulative cement output of large-scaled enterprises amounted to 1.235 billion tons across China in 2006, up 16.51% y-o-y; the profit reached RMB 15.038 billion, rising 92.58% y-o-y. The cement output and profit both broke the record in the history.
Top Eight Regions by Cement Output in China, 2006
Source: Cement Industry Association
The structure adjustment of China cement industry had accelerated since the 10th Five-year Plan period, new dry-method production line will replace the backward production technique gradually, the enterprise concentricity improves successively, and the average profit level of the industry will elevate as well. National Development and Reform Commission issued Suggestions on Accelerating Cement Industry Structure Adjustment on Apr 13, 2006, and launched Cement Industry Development Policy on Oct 17, 2006, which put forward the enterprise number, scale, etc indicators of the cement industry in 2020, and the structure adjustment will definitely promote the whole industry development.
The cement industry is an industry of obvious scale effect. It is necessary for enterprises to enlarge the scale in the structure adjustment and become the regional leading cement enterprise if they want to set a steady foot and have the pricing right in the industry. Restricted by capitals, medium and small enterprises are difficult to enlarge the scale in a short period, but it provides valuable market opportunity for large powerful enterprises to merge and acquire. The merger and acquisition in the cement industry has become hot since 2006, Lafarge Group of France acquired Sichuan Shuangma, HOLCHINB.V added its A shares in Huaxin Cement, Heidelberg of Germany bought the shares of the subsidiary of Jidong Cement, Conch Cement brought in two strategic investors of MS Asia Investment Limited and IFC, Conch and Minerals Investment Limited bought the shares of Anhui Chaodong Cement Co., Ltd, etc.
Merger and Acquisition Cases in Cement Industry, 2006
Source: Cement Industry Association
There are various merger methods: merger among domestic enterprises, as well as the merger between domestic and foreign enterprises; large enterprise groups purchased small enterprises, and the transfer among large enterprises. In addition, merger cases occur successively, and the merger value becomes higher and higher. As the government strengthens the support to key cement groups, the financing bottleneck troubling the development of domestic leading cement enterprises will be solved gradually, the integration of cement industry will be promoted further, and the merger and reorganization will become intensified The merger and reorganization will strengthen the cement group, more powerful cement groups could be capable of implementing further merger and reorganization and accelerating to improve the industry concentricity. The investment opportunity produced by merger and reorganization will exist around the year of 2007.
The report introduces the overall comparison performance, operation, investment, etc of 20 listed companies in the cement industry in China in details, and analyzes their main business structure and latest market trends specifically.