11, Huaxin Cement released a record of investor relations activities. President Li Yeqing elaborated on his views and prospects on the domestic cement industry, commercial mixing of sand and gravel, and overseas markets.
About domestic cement demand and the industry. It is an objective fact that the
domestic demand for cement is declining, but there is no doubt that this is not just starting now. In 2014, the domestic demand for cement has peaked. Of course, we have a plateau and gradually decline.
In fact, the current result is that the domestic demand for cement has dropped from the peak of 2.49 billion tons in 2014 to 2.02 billion tons last year, about 20%, which is a reasonable figure in terms of the 10-year cycle. But the result is a sharp decline in industry profits, last year the industry's profits were only about 32 billion, has been lower than in 2015 , if we consider that many enterprises in the industry now aggregate, mixed business and overseas business contributions are far more than at that time. Looking at the domestic cement business alone, the industry profit is even lower.
I think China's cement industry is now suffering at the bottom of a process, from the future development trend, many people have different views.
My view is that the gradual decline in demand is an inevitable trend , because China's per capita demand for cement can not be maintained at the level of 1.5-1.6 tons for a long time, but I do not think it is possible to see a cliff-like decline like Spain, which was affected by the financial crisis before. Because we should see that China's central government has a far better grasp of the whole macro-economy than any other country in the world.
The current situation is actually more a matter of confidence and ideas. Ten years ago, I told you that demand would decline, but you thought it would not decline. Now when you see the decline in demand, you panic too much. So my view is that the decline in demand is certain. But there will be no cliff-like decline.
In the current situation, I think there is a fundamental change in the concept of the industry. In the past, developed countries have basically gone through the process of overcapacity, but we have noticed that their business philosophy is still focused on commercial value, so even when their demand has declined more than we do now, their operating profits have not fallen off a cliff.
Our current situation is that demand has not actually dropped too much, but profits have fallen off a cliff, so I think the core goal of the current domestic cement industry should be profit recovery, the key to profit recovery is price.
About aggregates and commercial mixing business. At present, the profit of
sand and gravel industry is good, but people are generally pessimistic about the future expectations.
My view is that the sand and gravel industry is a more "short-legged" product than the cement industry. Although the concentration of the whole sand and gravel industry in China is not high, the concentration of the sand and gravel industry in the actual regional market is already very high. In the past 10 years
, the mixed industry has been running at the bottom, but there is no such situation as the current cement industry. The profits of the whole industry are still growing, and the control of benefits and bottom line is better than that of the cement industry. Because commercial mixing is a business with shorter business process and logistics radius and higher regional concentration.
On the other hand, as more large-scale cement and aggregate enterprises enter the commercial mixing field, the concentration of the commercial mixing industry will be higher and higher, including the business model, especially the control of accounts receivable will continue to improve. From this point of view, I think aggregate and commercial mix are still an industry that can be expected.
About carbon emissions. At present, a number of policies on
carbon emissions have been issued at the national level, and we look forward to moving towards the stage of dual control of carbon emission intensity and total amount as soon as possible, which will bring more opportunities to the industry.
About overseas markets.
From the data we collected, demand should be relatively more stable, and the capacity situation in most regions is basically stable, although some regions are also overcapacity, but also basically found a balance.
Attention should be paid to the fact that the high growth of short-term demand in some markets has led to the entry of a large number of new production capacity, such as the new production capacity of about 7 million tons in Fergana, Uzbekistan, in 2023, and about 15 million tons under construction, most of which are Chinese enterprises. The market will soon change from short supply to oversupply, and the impact of this investment philosophy and model on the industry ecology may also lead to resistance and protests from local governments and enterprises.
Generally speaking, the development of overseas investment is full of opportunities, but also full of risks, which requires more wisdom from Chinese enterprises.
The company's four major strategies have supported our development over the past decade, including the integrated transformation strategy, the overseas development strategy, the business expansion strategy of new building materials, and the traditional industrial and digital innovation strategy. In the face of the current situation, we will maintain our strategic focus and continue to move forward along a clear strategic direction.
In 2024, our goal is very clear, Huaxin never takes sales volume as our assessment and pursuit, we will adhere to the concept of " profit is the goal, price (income) is the basis ". We will strive to achieve positive growth in operating income, EBITDA and operating cash flow.
