Sinoma to hike cement output through purchasing Qilianshan stake


Updated Tue, 29 Dec 2009 00:00:00 GMT

China National Materials Co Ltd (Sinoma) is increasing its shareholding in Gansu Qilianshan Cement Group Co Ltd to further expand capacity, the cement equipment and engineering services provider said in a statement on its website yesterday.

Sinoma plans to buy a 51 percent stake in Gansu Qilianshan Holdings Co, which is the largest shareholder of the Shanghai-listed Qilianshan Cement with a 12.78 percent stake, for 333 million yuan.

The deal is by far the largest in China's cement industry this year, said sources.

Prior to this, Sinoma had acquired an 11.58 percent stake in Qilianshan Cement in June and was the second largest shareholder in the company.

Sinoma plans to acquire 35.67 percent stake in Qilianshan Holdings from the Gansu provincial government for 232.77 million yuan. It will also pay Qilianshan Holdings additional capital of 100 million yuan, representing approximately 15.33 percent of its enlarged capital.

After the deal, Sinoma's cement capacity would reach 100 million tons by 2011 and help it have a nearly 70 percent share of the cement market in the northwestern region, said Chairman Tan Zhongming.

The company also plans to invest 5 billion yuan in Gansu province by 2013.

Qilianshan Cement's profit for the first sixth months of this year nearly doubled to 159 million yuan. It has a production capacity of 10 million tons, and accounts for nearly 40 percent of Gansu's cement capacity. The company expects its output to reach 15 million tons by 2011.

The northwest region is considered to be the fastest growing cement market in China and Sinoma's early moves could help it have a lead over peers. It recently bought Xinjiang Tianshan Cement Co and Ningxia Saima Industry Co, and now controls 40 percent and 60 percent market share in Xinjiang and Ningxia respectively.

China's cement industry has been undergoing a lot of activity recently after the government urged the sector to consolidate through mergers and acquisitions. The industry is also facing an overcapacity situation, said sources.

In addition, the sector always had a regional concentration. Beijing-based BBMG and Hebei province's Jidong Cement Company are the largest rivals in northern China while Taiwan Cement has become the largest cement maker in southern China recently, replacing Anhui Conch Cement.

French cement maker Lafarge is also eyeing the Chinese market and considering buying Shuangma Cement, a Sichuan province-based company.