under the dual pressure of high coal prices and poor performance on the demand side, the profits of the cement industry are generally under pressure
On April 8, Guangdong Tapai Group Co.Ltd(002233) ( Guangdong Tapai Group Co.Ltd(002233) ) released the performance forecast. It is estimated that the net profit in the first quarter of 2022 will be 492446 million yuan – 703495 million yuan, a year-on-year decrease of 80% – 86%; Coincidentally, Gansu Qilianshan Cement Group Co.Ltd(600720) ( Gansu Qilianshan Cement Group Co.Ltd(600720) ) also predicted that the net profit in the first quarter would drop by 87% – 99% and the profit was less than 6 million yuan.
the industry expects that the first quarter is the traditional off-season of the cement industry, which is superimposed on many places in the country. Due to the outbreak of the epidemic, the recovery of downstream demand for cement is affected; However, under the background of steady growth, when the epidemic situation is controlled, it is expected that the market demand will be released intensively, and the cement industry is expected to pick up
net profit decreased by more than 80%
According to the Guangdong Tapai Group Co.Ltd(002233) performance forecast, there are two main reasons for the sharp decline of more than 80% in the first quarter of this year: one is the cost pressure caused by the rise of coal price; Second, the profit and loss of changes in fair value caused by floating losses of securities investment is negative.
As a high energy consumption industry, fuel and power costs account for half of the cost of cement. Since last year, the rise of coal price has become the pain point of the whole cement industry. In 2021, the average price of China Shipbuilding Industry Group Power Co.Ltd(600482) coal exceeded 1000 yuan / ton, up 78.2% year-on-year. In the fourth quarter of last year, it once hit the peak of 2500 yuan / ton. Under the sharp increase of cost, most cement enterprises fell into the dilemma of profit decline. Under several rounds of government regulation, although the price of thermal coal has been corrected, it is still running at a high level. In the first quarter, the price of coal long-term association increased significantly year-on-year and remained in the range of 720725 yuan / ton, and the profits of cement enterprises are still under pressure.
Guangdong Tapai Group Co.Ltd(002233) said that the increase in cement price in the first quarter was difficult to cover the cost increase, and the comprehensive gross profit margin decreased significantly. In 2021, the gross profit margin of all grades of cement of the company showed a downward trend, of which the gross profit margin of grade 42.5 with the largest sales volume was 38.95%, a year-on-year decrease of 2.21 percentage points. In addition, due to the slow recovery of downstream construction, the company’s cement shipment decreased significantly, and the sales volume decreased by about 25% year-on-year.
In addition to the decline of the main business, the fluctuation of the secondary market in the first quarter also had an adverse impact on Guangdong Tapai Group Co.Ltd(002233) profits. Due to the floating loss of securities investment, the non recurring profit and loss is expected to be – 62 million yuan. According to the data of the annual report, Guangdong Tapai Group Co.Ltd(002233) holds several funds and shares of domestic and foreign listed companies, and Dongjiang Environmental Company Limited(002672) , Guangdong Provincial Expressway Development Co.Ltd(000429) , China building materials, Xinjiang Tianshan Cement Co.Ltd(000877) are among its holdings, of which Dongjiang Environmental Company Limited(002672) , Xinjiang Tianshan Cement Co.Ltd(000877) decreased by 6% and 14% respectively in the first quarter.
The Gansu Qilianshan Cement Group Co.Ltd(600720) situation in the same cement industry is similar. According to the performance forecast, Gansu Qilianshan Cement Group Co.Ltd(600720) the net profit in the first quarter was 83 Shenzhen Seg Co.Ltd(000058) 30000 yuan, a decrease of 41-46 million yuan compared with the same period of the previous year, a year-on-year decrease of 87% – 99%; The net profit after year-on-year deduction was – 9.77 million yuan, a year-on-year decrease of – 4.77 million yuan. The reasons for the decline in performance are similar to Guangdong Tapai Group Co.Ltd(002233) similar. First, affected by the rise in the purchase price of raw coal, the sales cost of products increased year-on-year and the gross profit of products decreased; Second, some areas where the company is located are affected by covid-19 epidemic, resulting in a year-on-year decrease in cement sales.
subsequent recovery is expected
According to the annual report, the profitability of the main business of most listed cement companies declined in 2021, and the industry leader Anhui Conch Cement Company Limited(600585) who has always been famous for cost control was not spared. In the first quarter, affected by the epidemic prevention and control and rainy weather, the demand performance of China’s cement market is still poor, the market supply exceeds demand, the inventory rises, the prices in some areas fall, and the enterprises still face great pressure in the short term.
however, with the increase of coal supply guarantee and the continuous improvement of price formation mechanism, and the gradual release of downstream demand, the cement industry is expected to get out of the low point in the follow-up
On the cost side, in February this year, the national development and Reform Commission issued a notice on further improving the price formation mechanism of the coal market, setting a reasonable range of medium and long-term transaction prices for coal extraction in key areas, including 370570 yuan / ton for coal with a calorific value of 5500 kcal in Shanxi, 320520 yuan / ton in Western Shaanxi, 260460 yuan / ton in Western Mongolia, and 200300 yuan / ton for coal with a calorific value of 3500 kcal in eastern Mongolia, The notice shall be implemented from May 1; At the same time, the plan for increasing coal production is put forward, requiring another 300 million tons of production capacity to be released within the year, with a daily output of more than 12.6 million tons. The industry expects that the coal output in the second quarter will gradually increase to the high level in the fourth quarter of last year, the tight supply and demand pattern is expected to slow down, and the price is becoming more and more stable.
On the demand side, the government work report puts forward the goal of GDP growth of 5.5% in 2022, and the annual infrastructure investment will maintain stable growth and play a counter cyclical regulatory role. The projects started intensively in the first quarter, and the investment in many places made a “good start”. 102 major projects identified in the 14th five year plan include more than 2600 major projects, of which 96% have been started Anhui Conch Cement Company Limited(600585) once said at the annual performance briefing that the cement market is expected to show a trend of low before high in 2022. The total annual supply is expected to decline slightly, and the relationship between supply and demand remains relatively balanced.
Tianfeng Securities Co.Ltd(601162) research report pointed out that the cement industry was at a low point in the first quarter or the second quarter. With the year-on-year weakening of the impact of coal prices and the opening of price increases, the performance of cement enterprises may improve quarter by quarter. Under the double carbon target, the backward production capacity of the industry will accelerate the exit, and the industry as a whole may develop in the trend of “volume reduction and price increase”, and the concentration will further improve
