In the first half of the year, Western Cement (2233.HK) realized business income of 4.398 billion yuan, an increase of 5.93% over the same period last year, of which the domestic market accounted for 72.5% and the overseas market (Africa) accounted for 27.5%; The net profit attributable to the parent company was 532 million yuan, a year-on-year decline of 19.14%, and the net profit attributable to the parent company continued to shrink for two years. The sales volume of cement was 9.14 million tons, a year-on-year increase of 5% (the domestic sales volume declined and the overseas sales volume increased significantly).
Figure 1, 2. Operating revenue and net profit
attributable to parent company of Western Cement in the first half of the year Source: Cement Big Data (https://data.ccement.com/)
Domestic market volume and price fell The utilization rate of commercial mixed aggregate production capacity was low
in the first half of the year. Western cement sales in Shaanxi, the main domestic market, declined by 4.39% year-on-year, while the average sales price also dropped by 16%, showing a decline in both volume and price. Shaanxi infrastructure investment growth and real estate construction and installation investment growth continued to decline, cement market demand was sluggish, prices continued to fall, dragging down the company's overall profits further. Sales in Xinjiang market also declined, with sales falling by 9.3% year-on-year to 880000 tons and prices falling by 6%, but the average price remained above 400 yuan/ton, mainly due to good local industry self-discipline and closed market. The layout of Guizhou Market Company is close to Gui'an New Area, and the sales volume has increased, but the competition is fierce and the price has fallen. In terms of commercial mix and aggregate, the sales volume of aggregate was 2.06 million tons in the first half of the year, representing a year-on-year decrease of -10.4%, and the sales volume of concrete was 920,000 cubic meters, representing a year-on-year increase of 43.8%. The production capacity remained unchanged in the first half of the year without further expansion, and the utilization rate of production capacity was significantly lower than average level of the industry.
In the first half of the year, the company's cement and aggregate revenue declined, the business capacity rate further declined, and the domestic business revenue was 3.19 billion yuan, down 13.39% year-on-year. Despite the year-on-year decline in coal prices during the year, domestic business profits declined significantly due to the continued decline in sales prices.
Figure 3: Changes in
revenue structure of domestic and foreign businesses in the first half of 2020 ~ 2023 Data source: Cement Big Data (https://data.ccement.com/)
Profit increment contributed by African market In the first half of the year, the
company's overseas market revenue increased significantly, with a revenue of 1.209 billion yuan, an increase of 157.44% over the same period of last year, which is the reason why the company's revenue growth in the first half of the year and the profit decline is far below the average level of the industry. Overseas cement clinker sales reached 1.79 million tons, an increase of 145% over the same period last year, and overseas cement production capacity accounted for 14.6% of the company's total production capacity.
Last year, Western Cement further acquired a stake in Ethiopia's National Cement Share Company (NCSC) and achieved a holding of 61.9%, while completing the upgrading of the plant and putting it into operation in November, with an annual output of 1.3 million tons of cement. In the first half of this year, the company's average selling price in the Ethiopian cement market was as high as 875 yuan/ton, and achieved sales of 660,000 tons, contributing 578 million yuan in revenue. Western Cement also plans to build a new 10,000-ton line in Lemi Town, Amhara State, Ethiopia (5 million tons of cement per year, planned to be put into operation in 2024).
In addition to the performance increment brought by the acquisition of NCSC, in the first half of the year, the cement plants of Western Cement in Congo (DRC) and Mozambique contributed 58.9 million yuan and 470 million yuan respectively to the cement business revenue, and the volume and price of the Mozambican market increased simultaneously.
Table 1: Sales volume and production capacity of
cement in overseas markets in the first half of the year Source: * Including clinker, cement Big data (https://data.ccement.com/)
Outlook for
the second half of the year The growth of infrastructure construction in the fatigue of the Western Cement market and the undercapacity of the real estate sector will continue to exert pressure, and it is expected that the demand will not be significantly improved, and the cement price is expected to remain weak. In recent years, Western Cement has continued to develop overseas markets, continuously increasing the proportion of overseas business income and further proposed expansion plans, and its business in Africa, Central Asia and other places will continue to expand. The per capita cement consumption in the African market is low, the demand potential is large and the profit is high. The relatively stable political environment and further industrialization process in Mozambique, Ethiopia and other countries are expected to accelerate the release of cement demand and drive the growth of the company's overseas business. (The contents of this article do not constitute investment advice)
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