On January 14, the second phase project of Huaxin Cement Plant, invested by Huaxin Cement Tanzania Maveni Company, was officially put into operation. As the largest cement enterprise in Tanzania, it will help the country bid farewell to the history of cement import. The second phase project
of Huaxin Cement Plant started construction on August 31, 2022. The construction content is to add a new dry process cement clinker production line with a daily output of 4000 tons and a 15 MW biomass power station.
In addition, Huaxin Cement recently issued a notice. Huaxin (Hong Kong) International, a wholly-owned subsidiary of the company, signed a share sale agreement with INTERCEMENTTRADING INVERSIONES to acquire 100% equity of Natal Portland Cement Company (Pty) Ltd. and completed the equity delivery procedures. Upon completion of the acquisition, the overseas clinker production capacity of Huaxin Cement was further increased. What impact will
this have on the depressed industry and Huaxin? Is "going out" a good medicine to resolve overcapacity?
Huaxin Cement is an important member of the early "going global" enterprises in China. In 2015, the company formally put forward its overseas development strategy and steadily promoted its overseas business. During the "13th Five-Year Plan" period, the company's overseas business was mainly concentrated in Cambodia, Tajikistan, Kyrgyzstan and other countries. After entering the "14th Five-Year Plan", Huaxin's overseas expansion has accelerated, its business scope has expanded to Zambia, Nepal, Mozambique and Oman, and its expansion is mainly based on acquisition and merger (accounting for 70%). Especially after entering 2023, Huaxin has made frequent overseas moves, taking control of some cement enterprises in the Middle East, Oman and South Africa respectively, and completing the assets delivery quickly. Overseas production capacity has been further expanded.
Table 1: Overseas M & a cases
of Huaxin Cement Source: Cement Big Data (https://data.ccement.com/)
Before 2015, Huaxin's overseas clinker production capacity was less than 2 million tons, which increased steadily during the "13th Five-Year Plan" period. In 2020, it reached 6.17 million tons, and after 2021, overseas expansion accelerated. After the completion of two mergers and acquisitions in 2023, the clinker production capacity expanded to 12.5 million tons, catching up with Conch Cement (13.89 million tons).
Figure 1: Rapid Growth
of Overseas Production Capacity of Huaxin Cement in 2023 Data Source: Cement Big Data (https://data.ccement.com/)
Expand the Moat Since
2022, the domestic cement market has been pre-cooled, and Huaxin's domestic cement business revenue has declined, while its foreign business has been unusually bright. In the first half of 2023, Huaxin Cement achieved an overseas revenue of 2.302 billion yuan, an increase of 30.57% over the same period last year, which to some extent hedged the decline in domestic revenue, with overseas revenue accounting for 14.5%, an increase of 0.6 percentage points over 2022.
Figure 2: Huaxin's overseas revenue and proportion continue to increase
Data source: Cement Big Data (https://data.ccement.com/)
Future outlook: Accelerating "going out" is a good medicine?
Huaxin Cement has said that during the "14th Five-Year Plan" period, it will deepen the implementation of overseas development strategy, strive to quadruple foreign production capacity by 2025, and become a multinational group in the whole building materials industry chain. According to the plan, the overseas clinker production capacity of Huaxin Cement will increase by 12.4 million tons during the 14th Five-Year Plan period, 6.33 million tons in 2021-2023 and 6.07 million tons in 2024-2025. Huaxin Cement is backed by powerful overseas shareholders and has rich experience in international operation. Huaxin Cement may still expand overseas production capacity through equity acquisition.
At present, the degree of overcapacity in China is getting worse, and cement enterprises are actively transforming to find a new way out. At present, there is still a large market demand in the "Belt and Road" countries. In addition to expanding the upstream and downstream industrial chains and entering the secondary industry, it is also a feasible way to actively expand the overseas market, which is worth pondering by the industry.
Figure 3: Domestic Overcapacity Becomes More Serious
Data Source: Cement Big Data (https://data.ccement.com/)
