West China Cement expands
Article Date: Mar 27 2007AIM newcomer West China Cement has more than doubled pre-tax profits to £5.2 million and plans further expansion.
Headed by formidable founder and chief executive officer Jimin Zhang, West China boosted profits in 2006 on turnover 33 per cent ahead at £20.5 million, helped by buoyant demand in China for the company's 'dry-processed' cement, which is less environmentally damaging than traditionally produced cement. West China, which with state government encouragement is a dominant player in China's landlocked Shaanxi province, produced 1.47 millions tonnes of cement last year and hopes to lift that to 3.5 million tonnes in two years.
Chaired by ex-Tarmac boss Robert Robertson and with a board including South African niche financier Brett Miller, the company, which raised £20.5 million net with Insinger's 105p float in December, is increasing production with a new plant at Lantian, near the provincial capital of Xi'an. West China hopes eventually to take capacity to more than 5.5 million tonnes.
Jimin Zhang argues the company's position is strengthened by being close to the limestone deposits from which its raw material is drawn and to its key markets, as well as being bolstered by government tax breaks. Although electricity prices are set to rise five per cent a year, the company, which claims two years of coal stocks, is using some of its cash flow to invest in a process which it hopes will cut costs 25 per cent by re-using electricity.
West China says it also hopes to increase market share further as government-backed consolidation phases out more of the heavily polluting small producers which still account for a major chunk of China's cement industry. At 130.5p, valuing the company at £83 million, the shares should have further to go.
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