Anhui Conch is going global to boost output

WUHU, Anhui - Anhui Conch Cement Co Ltd, China's biggest cement producer, plans to add 10 million tons to its annual capacity by 2015 through overseas expansion, by setting up factories of its own and acquiring international rivals weakened by the European debt crisis, a senior company official said.

Wang Jianchao, manager of Anhui Conch's foreign economic cooperation department, said his company, which currently has no overseas production, is engaged in a go-global strategy.

The Shanghai-listed company produced 110 million tons of cement in China last year, according to its annual report.

"Many cement plant owners in the eurozone want a quick bailout because they need cash to save their business, which was hit hard by the European debt crisis," Wang said, adding that his company is moving at the best time to build its overseas operation.

He declined to disclose the budget for strategy, but said the company is financially strong enough to expand.

Anhui Conch Cement began its overseas expansion in late June when it signed a Memorandum of Understanding to invest $2.35 billion in several Indonesian cement plants. Wang offered no details on the status of the proposed Indonesian projects, but he hinted that the Anhui Conch's first foreign factory may open elsewhere because opportunities in other countries are also being explored.

"Apart from Indonesia, we are in discussions with potential business partners in Mongolia, Central Asia and South America. It's hard to say whether our foreign production will operate in Indonesia first, because other foreign projects may proceed more smoothly," Wang said.

He added that the company will consider suitable investment opportunities wherever they occur and said that the main criteria are that they have a good resource supply and cement market, and mature production technology.

To help its overseas expansion plan go smoothly, Anhui Conch teamed up with the Swedish industrial leader Atlas Copco Group AB to gain access to its cutting-edge mining machinery and training systems.

The two companies have a history of cooperation dating to 1993, and the drilling equipment used by Anhui Conch is supplied by Atlas Copco.

As part of the strategic partnership formed on Tuesday, the Chinese cement maker will offer a new mining equipment contract of $40 million to Atlas Copco over the next five years.

"Apart from our modern technology and our edge in the safety perspective, we have a global operation network in 170 countries and regions," said Robert Fassl, senior executive vice-president of the Stockholm-based company.

Fassl said that by having strong teams in almost every country, Atlas Copco can greatly assist Anhui Conch in its go-global strategy.

The Swedish company has a strong customer center in Indonesia, he said, where the Chinese company is investing in plants.

Anhui Conch Group Holdings Co Ltd, based in Wuhu in East China's Anhui province, the cement maker's parent company, had 53.9 billion yuan ($8.48 billion) in revenue in 2010.

The biggest building material provider in China wants to maintain its leadership by expanding to other countries because China has restrictions on new cement projects, to combat the industry's overcapacity.

Wang, who is also assistant managing director of Anhui Conch Group, said that it plans to increase its cement production capacity from 190 million tons a year in 2010 to 300 million tons by the end of 2015, 10 million tons of which will come from foreign countries.

The domestic production capacity boost will mainly be achieved through mergers and acquisition, while various investment methods will be used overseas, Wang said.

According to the China Cement Association, China produced 1.88 billion tons of cement in 2010, more than half of the world's total output. The association estimates that the cement production in China will reach 2.1 billion tons by the end of this year.

China Daily