At the beginning of the new year, leading cement enterprises took frequent actions to accelerate interbank acquisitions while the valuation was low, so as to expand the industrial chain and enhance their voice.
On February 9, cement leader Xinjiang Tianshan Cement Co.Ltd(000877) (000877. SZ) disclosed the fixed growth plan, issuing 315 million A-share shares to 16 investors, raising a total of 4.247 billion yuan.
Among the companies that have obtained the quota, there are many listed cement companies. Among them, Anhui Conch Cement Company Limited(600585) (600585. SH) was allocated 1 billion yuan; Hebei Jinyu Dingxin cement under Tangshan Jidong Cement Co.Ltd(000401) (000401. SZ) was allocated 500 million yuan; Zhejiang Shangfeng building materials under Gansu Shangfeng Cement Co.Ltd(000672) (000672. SZ) was allocated 300 million yuan, and the lock-in period was 6 months.
Since the second half of last year, the cement industry is experiencing a new round of integration and merger.
Kong Xiangzhong, executive president of China Cement Association, said in an interview with the 21st Century Business Herald reporter that the in-depth competition and cooperation of the cement industry will become a trend this year. Large enterprises will jointly integrate the market, optimize the market layout and improve the regional competition pattern.
Anhui Conch Cement Company Limited(600585) became the third largest shareholder
At the end of last year, with the business integration of the cement sector under China building materials came to an end, Xinjiang Tianshan Cement Co.Ltd(000877) became the world’s largest cement enterprise after the performance of “snake swallowing elephant”, and its market value also jumped to more than 100 billion yuan. The final release of the non-public offering plan of raising supporting funds is also an important follow-up action after the acquisition plan.
According to the announcement, Xinjiang Tianshan Cement Co.Ltd(000877) the total amount of funds raised this time reached 4.247 billion yuan. The funds raised are used to supplement working capital, repay debts and pay restructuring expenses. The total assets and net assets of the company will increase accordingly, and the capital strength, anti risk ability and follow-up financing ability of the company will be improved.
Among the objects allocated this time, there is Anhui Conch Cement Company Limited(600585) which rarely misses foreign investment again. After the registration of additional issuance is completed, Anhui Conch Cement Company Limited(600585) will hold Xinjiang Tianshan Cement Co.Ltd(000877) 0.86% shares, ranking the third largest shareholder.
After the second half of 2020, the valuation of individual stocks in the cement sector decreased, which also means a more cost-effective acquisition cost, Anhui Conch Cement Company Limited(600585) frequently acquired the equity of many listed and non listed companies in the secondary market. At present, Anhui Conch Cement Company Limited(600585) is an important shareholder of many listed companies, and raises cards for four enterprises, including Jilin Yatai (Group) Co.Ltd(600881) (600881. SH), Anhui Xinli Finance Co.Ltd(600318) (600318. SH), western cement (2233. HK) and China West Construction Group Co.Ltd(002302) (002302. SZ).
It is worth noting that due to the sharp rise in coal prices and the expansion of clinker trade business, the growth rate of net profit attributable to parent company reported in Anhui Conch Cement Company Limited(600585) 2021 changed from positive to negative. The growth rate of Tangshan Jidong Cement Co.Ltd(000401) attributable net profit in the same industry reached 22.7% and Jiangxi Wannianqing Cement Co.Ltd(000789) was 21.8%.
For this fixed increase, Anhui Conch Cement Company Limited(600585) said that Xinjiang Tianshan Cement Co.Ltd(000877) has a strong influence in the cement industry. The equity cooperation between the company and it is conducive to the continuous strengthening, excellence and expansion of the company’s main cement industry, as well as the healthy and orderly development of the cement industry.
Tangshan Jidong Cement Co.Ltd(000401) also said on the interactive platform that Xinjiang Tianshan Cement Co.Ltd(000877) as a leading enterprise in the cement industry, this participation in fixed growth can share the development achievements of the cement industry, especially Xinjiang Tianshan Cement Co.Ltd(000877) , and further improve the profitability of the company.
Sun Ying, an analyst at Zhongtai Securities Co.Ltd(600918) , said that the main advantage of cement listed enterprises is that they have sufficient cash on their books. Taking Anhui Conch Cement Company Limited(600585) as an example, the company’s net monetary capital and operating cash flow reached 62.81 billion yuan and 34.8 billion yuan respectively in 2020. Abundant cash flow makes the leading cement enterprises have obvious capital advantages in the process of integration and business expansion.
increased market concentration
Since last year, the cement industry has been affected by multiple factors such as shrinking demand, double control and production restriction of energy consumption, and rising coal prices, resulting in large price fluctuations. Sun Ying said that the average price of cement in 2021 ranked first in the past few years, but due to the greater rise in coal prices, the whole industry increased revenue without increasing profits. According to the latest data of the Ministry of industry and information technology, last year, the operating revenue of the cement industry was 1075.4 billion yuan, a year-on-year increase of 7.3%, and the total profit was 169.4 billion yuan, a year-on-year decrease of 10%.
“serious overcapacity and unreasonable market layout are one of the biggest obstacles to the development of the cement industry.” Kong Xiangzhong believes that for a long time, the benefits of the cement industry have not been stable enough, and a slight fluctuation in the peripheral upstream market will be transmitted to the cement industry. At present, the cement industry accounts for 86.1% of carbon emissions in various industries of building materials. At the end of last year, the Ministry of industry and information technology issued the “14th five year plan” for the development of raw material industry, in which it was proposed that the cement production capacity should be reduced but not increased, and put forward stricter requirements for the cement production capacity. “In the context of double carbon, enterprises need to work together to integrate the market”.
According to the statistics of China cement network, seven typical cross group mergers and acquisitions of cement enterprises occurred in the cement industry in 2021. The feature of this round of M & A is that large enterprises are merging small enterprises to promote the improvement of market concentration. On the other hand, large enterprises also began to layout the northeast, northwest, southwest and some areas with scattered markets and low capacity utilization in the past.
With its strategic layout in East China and 585 {t} market in South China as the main example. Under the circumstances of strict control of cement production capacity and no obvious growth of demand, Anhui Conch Cement Company Limited(600585) has been extending the industrial chain and looking for new business growth points.
At the end of last year, Anhui Conch Cement Company Limited(600585) plans to participate in the fixed increase of China West Construction Group Co.Ltd(002302) with its own funds of 1.76 billion yuan. China West Construction Group Co.Ltd(002302) is the leader of concrete in China. According to the disclosure of the 2020 annual report, it has a design capacity of 100.82 million cubic meters of ready mixed concrete and a capacity under construction of 6.1 million cubic meters. After the fixed increase is completed, Anhui Conch Cement Company Limited(600585) will hold China West Construction Group Co.Ltd(002302) 16.3% shares and become the second largest shareholder of the company. Sun Ying believes that the follow-up Anhui Conch Cement Company Limited(600585) is expected to rely on its own advantages in cement and aggregate and cooperate with other leading enterprises to optimize the ecology of commercial mixing industry.
China Industrial Securities Co.Ltd(601377) in the research report, it is also pointed out that cement has the highest carbon emission intensity among raw materials, and the policy side has a strong constraint on the supply side. The cooperation between the two leaders of Anhui Conch Cement Company Limited(600585) and China’s building materials in cement, new materials and other fields represents the deep binding among cement enterprises and a deeper competition and cooperation relationship between enterprises. although the demand will decline, the industry has reached a consensus on increasing price and limiting production. The cement price has the ability to remain high, and the cement enterprises are expected to usher in a round of valuation and repair market.
In short, under the background of supply side contraction caused by double carbon, the cement industry is undergoing a new round of integration and merger, and the industry concentration is expected to further improve in the next few years.
