Multi pronged approach for cement enterprises to explore new growth points

2024-10-08 13:12:53

According to the 2024 semi annual report, the net profit of several listed companies in the cement industry has decreased year-on-year. Behind the pressure on profits, the downturn in the real estate market has dragged down demand, and the imbalance between supply and demand has led companies into price wars, resulting in a continuous decline in industry efficiency.

Experts say that in the face of unfavorable market conditions, cement leaders have strengthened their profitability resilience and expanded their market share by leveraging their own advantages; The implementation of policies related to carbon trading is expected to drive more rational industry development and accelerate the clearance of outdated production capacity. At the same time, listed companies are exploring new growth points and expanding their aggregate and commercial mixing businesses.

Performance under pressure

In the first half of the year, most enterprises in the cement industry faced a decline in net profits and an expansion of losses. Specifically, in the first half of the year, China National Building Materials' shareholder attributable loss was 2.018 billion yuan, while the shareholder attributable profit for the same period last year was 1.404 billion yuan. The net profit of Western Cement in the first half of the year decreased by 27.3% year-on-year. Jidong Cement achieved a revenue of 11.22 billion yuan in the first half of the year, a year-on-year decrease of 22.55%, and a net profit loss attributable to the parent company of 806 million yuan.

According to data from the National Bureau of Statistics, China's cement production in the first half of the year was 850 million tons, a year-on-year decrease of 10%. Industry insiders said that, from a macro perspective, the demand for cement continued to weaken, which was related to the continued slight decline in the growth rate of national fixed assets investment and infrastructure investment. The real estate market is still in the bottoming out stage, and the year-on-year decline in real estate development investment and construction area of real estate development enterprises across the country has expanded.

According to the 2024 semi annual report of industry leader Conch Cement, the company's sales of cement clinker self products decreased by 3.35% year-on-year, and its operating revenue decreased by 30.44% year-on-year; The net profit attributable to the parent company was 3.326 billion yuan, a year-on-year decrease of 48.56%. In the first half of the year, the real estate market has not yet stabilized, the growth rate of infrastructure investment has slowed down, domestic market demand continues to decline, and cement prices are running at the bottom. The company adheres to its goal orientation, actively responds to external unfavorable factors, and the overall decline in sales volume and profits is better than the industry average, maintaining resilience in operating performance. At the same time, the growth of aggregate and commercial mixing business is strong, and the industrial chain is further extended, becoming an important support for the company's operating performance

Accelerate transformation and upgrading

Against the backdrop of declining profitability of cement, relevant listed companies have extended their industrial chains one after another. In recent years, there has been a clear trend of integration in links such as "cement commercial mixing aggregate", and the collaboration between upstream and downstream enterprises in the industrial chain has been further strengthened.

Since 2022, Conch Cement has increased its aggregate production capacity construction. Hailuo Cement stated that the real estate industry has undergone a deep adjustment, and demand continues to shrink. The company's main cement business maintains a reasonable market share, and the contribution of new business formats has increased.

Wei Rushan, Executive Director and President of China National Building Materials Co., Ltd., stated at the mid-term performance conference that the company continued to reduce production and operation costs, financing costs, and accelerate transformation and upgrading in the first half of the year. The basic building materials sector is transforming and upgrading through "cement+", internationalization, "dual carbon", as well as high-end, intelligent, and green transformation to enhance its sustainable development capabilities; The new materials sector further enhances its core competitiveness and promotes international layout.

Shangfeng Cement stated that the company will adopt a more prudent and pragmatic strategy to respond to changes in the industry situation. On the basis of fine cost reduction, quality improvement and efficiency enhancement, the company extends the industrial chain of environmental protection, logistics, new energy, etc., continuously promotes the transformation and upgrading of business structure, builds core competitiveness, and supports the company's sustained and stable growth. In recent years, the company's aggregate business has developed rapidly, with the main advantages being its location layout and resource reserves. The company has sufficient high-quality resources to support the continuous growth of its aggregate business, while also ensuring the long-term stable operation of its main cement clinker business.

Demand is expected to rebound

Industry insiders indicate that under the combined influence of factors such as demand, supply, policies, and industry self-discipline, the cement industry is expected to have a positive trend in the future.

Meanwhile, industry insiders indicate that with the successive introduction of a new round of policies to support the development of the western region and the commencement of key projects, the demand for cement and building materials industry will be boosted. Under the strategy of developing the western region in the new era, the landing of infrastructure related funds in the western region has significantly accelerated, and related enterprises laying out infrastructure in the western region are expected to benefit.

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