China Shanshui Cement Group Limited ("Shanshui Cement" or the "Group"; HKEx: 00691), the largest cement enterprise in Shandong and Liaoning Provinces in China, has been striving to expand its business through acquisition and building new production lines.
Recently, the Group further expanded beyond Shandong presence to Inner Mongolia by acquiring Chifeng Yuanhang Cement Company Limited ("Yuanhang Cement").
Shandong Shanshui Cement Group Company Limited (a wholly-owned subsidiary of Shanshui Cement) and Yuanhang Cement signed an equity acquisition framework agreement on 18 August 2010. This follows on the heels of a cooperation framework agreement between the two companies signed in May 2010. Under the equity acquisition agreement, Shanshui Cement will acquire more than 80% equity interest in the new target company at a total consideration of RMB860 million in two stages. Shanshui Cement had acquired 50% equity interest of the new target company in the first stage. The Group will further acquire not less than 30% equity interest in the new target company within 13 months after the equity acquisition agreement becomes effective. The new target company's name will be changed to "Chifeng Shanshui Yuanhang Cement Company Limited" in due course.
Yuanhang Cement has two new dry process clinker production lines, each with a production capacity of 2,500 t/d (with two sets of 9MW low-temperature waste heat power generators), and three cement grinding lines with annual capacity of 1 million tonnes, 1.3 million tonnes and 300,000 tonnes respectively, adding annual cement production capacity to 2.6 million tonnes. Yuanhang Cement is the largest cement company in Chifeng City and Eastern Inner Mongolia Autonomous Region, possessing advanced management standards and strong cost-effective operations. The recognized brand name of "Yuanhang" has high brand awareness within the cement industry in these regions and elsewhere in the country.
Chifeng City is at the crossroads of Northeast and Northern China, adjoining the junction where the borders of Liaoning Province, Hebei Province and Inner Mongolia. It is also close to the two booming economic zones of Beijing-Tianjin-Tangshan Region and Liaoning Central-Southern Region. With a population of 4,600,000 which is about one-fifth of that in Inner Mongolia Autonomous Region, Chifeng City is a prosperous large city with abundant resources, convenient transportation and strong growth potential in market demand. Shanshui Cement takes the opportunity brought about by the restructuring of Yuanhang Cement to hasten the development of the three projects at Alu kerqin Qi, Balin Youqi and Huolinguole as well as further tap the markets in Chifeng and Eastern Inner Mongolia with a target production capacity of 10 million tonnes. Together with its operations in Liaoning, Shanshui Cement plans to increase its total production capacity of cement in the region to 30 million tonnes.
Mr. Zhang Caikui, Chairman of Shanshui Cement, said, "Leveraging on our leadership position in Shandong and Liaoning Provinces, the Group has stepped up to extend regional presence through the acquisition activities in Tianjin and Inner Mongolia and new construction activities in Shanxi and Xinjiang. In the second half of 2010, with the steady progress of the project in Inner Mongolia, the Group had begun the construction of the two clinker production lines and cement grinding station project in Kashi in September. These new projects enable the Group to further expand market coverage, grasp the opportunities of growth in demand triggered by national infrastructure and new rural construction projects, to reach new heights in future business development."