Comprehensive review: In the first half of 2023, Fujian Cement achieved an operating income of 1.026 billion yuan, a year-on-year decrease of 13.96%, and a net profit attributable to the parent company of -133 million yuan, a year-on-year decrease of 50.01%. In the first half of the year, the demand in Fujian, where Fujian Cement is located, weakened significantly, the sales volume and price of cement declined, coupled with high production costs, the loss margin of Fujian Cement increased.
Figure 1, 2: Fujian Cement's loss expands
in the first half of 2023 Data source: Cement big data (https://data.ccement.com/)
Profit indicators weaken Loss margin expands
In the first half of 2023, Fujian Cement's profit indicators weakened across the board. The gross profit margin recorded a negative value for the first time in the same period, which was -6.05%, representing a decrease of 7.71 percentage points as compared with the same period of 2022, and the net profit margin and return on equity were both negative. As the relevant expenses in the three fees were included in the operating costs, coupled with the reduction of some expenses, the three fees rate of the Company decreased by 2.89 percentage points to 12.87% as compared with the same period, but the overall rate was still high.
Table 1: Main Operation Data
of Fujian Cement in the First Half of 2023 Data Source: Cement Big Data (https://data.ccement.com/>) The
production cost is high and the proportion of coal is too high
. For cement enterprises, the cost of coal accounts for the largest proportion of the production cost, generally 50% -60%, sometimes even higher. According to the production cost of cement clinker per ton of major cement listed companies in the first half of 2023, Fujian Cement reached 278 yuan per ton, which is the listed company with the highest production cost per ton, while the cost per ton of Tapai Group, which is close to the operating area, is about 230 yuan per ton, and that of Asia Cement is 254 yuan per ton. According to the data of cost splitting per ton, the coal cost of Fujian cement is the highest among the major listed companies after the sharp rise in coal prices in 2021, reaching 176 yuan per ton in 2022, accounting for more than 60% of the total production cost. In the first half of the year, three of the cement listed companies that have announced their performance have suffered losses, but only Fujian Cement is a loss-making company whose operating cost is greater than its operating income. The author speculates that in the first half of 2023, the coal purchase cost of Fujian Cement is still high, and the coal cost per ton of cement clinker remains high, which has caused a greater drag on profits.
Figure 3: Coal Cost Per Ton of Cement Clinker of Major Listed Companies (RMB)
Data Source: Cement Big Data (https://data.ccement.com/)
Weakening of Regional Demand The sales area of
the company's products is mainly located in Fujian, and a small part of them are sold to Zhejiang and Guangdong. In the first half of 2023, the cement market in Fujian was greatly affected by the downturn of real estate, and the demand weakened significantly. In the first half of the year, the cement output in Fujian was 37.8636 million tons, down 19.46% from the same period last year. Affected by this, Fujian cement sold 3.86 million tons of cement clinker in the first half of the year, down 7.01% from the same period last year. In addition, the concentration of production capacity in Fujian is low, the implementation of peak staggering is poor, the synergy of enterprises is not strong, coupled with the impact of the surrounding market, the price of disorderly competition occurs from time to time, and the cement price in Fujian has been declining all the way. In the first half of the year, the average price of cement clinker, the main product of Fujian Cement, was 261.25 yuan/ton, down 7.7% from the same period last year, and the price of Fujian cement products was at a low level among the major listed companies.
Figure 4, 5: Both volume and price of Fujian cement decrease
in the first half of 2023 Data source: Cement Big Data (https://data.ccement.com/)
Outlook for the second half of 2023: Demand is not optimistic, and it is difficult for profits to turn positive
. Despite the adjustment and optimization of the real estate policy, the pressure on the short-term investment side remains unchanged. From January to July this year, Fujian's real estate investment fell by 11% year-on-year. It is expected that the demand for cement from the real estate side will still be a drag in the second half of the year, or will still decline year-on-year; Internally, under the background of overcapacity, the synergy of regional enterprises is not good, the external impact is great, and the pressure of rising cement prices is heavy. At the same time, the situation of high cost and low price of Fujian Cement's own products is difficult to improve in the short term, and it is expected that the company's performance will face greater pressure in the second half of the year. (This article does not constitute investment advice)
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