Hong Kong Cement companies rose across the board after BBMG, 2009 HK announced an increase in net profits for the 1st half of 60% to 80%. The increase was attributed to an increase in its property sales segment, with net profit of 1,047,743,400 and eps of .22 for the first half. This is the only indication of the source of the profit increase. The property development segment had an increase in booked gross floor area of 82% from 398 square meters to 727 from prior year period.
The company stated that sales of cement and clinker product increased by 20.5% year on year, at 17.09 million tons. No mention of profits in this segment were made. For the year ending 2015, cement sales were 26.8% of revenue with property development at 41.9%. Gross profits were just 3.6% of revenues for cement; 15.4% for property development. For the first quarter of 2016, gross revenue was down 4.25% and gross profits were down 10.4% making the 6 month projection a surprise and dependent upon unpredictable property sales versus higher cement prices and revenue.
In contrast, major operator Anhui Conch, 914 HK, with a massive market cap of 99 Billion HK (12.8b US) – no 2nd quarter or first half reports yet but 1st quarter showed a sales revenue decline of 5.5%, a gross margin decline of 34.5% and a net profit decline of 31.7% despite government subsidies. This pure play cement company blamed the declines not on volume declines but on price declines. It is doubtful that the first half will show a major change in cement prices, while prices remain under pressure and the much promised capacity declines remain a myth.