Lesso Group expects consolidation in China's plastic pipe sector

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: August 20, 2013 1:53 pm ET
Updated: August 20, 2013 1:56 pm ET

Related to this story

Topics Construction, Mergers & Acquisitions, Pipe/Profile/Tubing, Extrusion

Signs of a more difficult market for plastic pipe in China have not apparently caused major problems for pipe maker Lesso Group Holdings Ltd., which reported that sales in the first half of the year rose 18 percent to 5.692 billion yuan ($929.2 million) and profits rose 13 percent to 678 million yuan ($110.7 million).

Lesso, which changed its English name from Liansu earlier this year, said it was pushing ahead with a new pipe plant in Hainan Province, its 15th nationwide, as part of 1 billion yuan ($163.2 million) in capital investment this year. It plans to open a facility in Yunnan Province next year.

The company, China’s largest plastic pipe maker, said demand for plastic pipe remained steady as the country’s urbanization continued.

But it noted worrying trends such as more price pressure in PVC pipe markets, general economic belt-tightening in China and concerns over the “deterioration” of local government debt that could pinch its property and infrastructure markets.

“Although there was a complex, volatile and challenging macro environment, the Group’s business environment of plastic pipe in the first half of 2013 seemed to be less strenuous than the same period last year,” it said. “Demand for plastic pipe remained steady during the review period, as infrastructure activities and sales of residential properties in China continued to be stable.”

However, Foshan -based Lesso mentioned several times in its Aug. 19 report to the Hong Kong Stock Exchange that it expects the difficult economic situation to “further intensify the consolidation of the plastic pipes and pipe fittings industry.”

It said it believed it has advantages as the sector consolidates because of its large size and focus on expanding its sales network.

China’s plastic pipe industry last year saw its slowest growth in five years, although it still saw pipe production rise 10 percent, to 11 million metric tons, according to figures from the Beijing-based China Plastics Piping Association.

Lesso said it was responding with a more stringent credit policy to distributors, demanding payment in advance or on delivery for everyone except the most well-established firms.

“In the wake of the deceleration in China’s economic activities, the Group has been proactively pursuing the strategy of economies of scale and expanding [its] sales network in a bid to drive both turnover and profit growth,” it said. “The management expects this strategy to further precipitate industry consolidation.”

The company said its volume of pipe sold rose 18.3 percent in the first half of the year, to 556,000 metric tons, with PVC pipe accounting for 439,000 metric tons. It said the average selling price for its PVC pipe dropped 3.3 percent, to 8,032 yuan ($1,311.19) per ton, while the price of non-PVC pipe rose 0.9 percent, to 15,786 yuan ($2,576.99) per ton.

The company also disclosed that it paid $136 million yuan ($22.2 million) in April to acquire Fengyang Chiao Yue New Construction Material Co., Ltd., a maker of calcium silicate board, which it called an environmental building material. It renamed the company Anhui Lesso Chiao Yue New Construction Material Co., Ltd.

Lesso in recent years has announced investments in new lines of business outside of plastic pipe, mainly in other building products, but those efforts have yet to become a significant part of its sales.


Comments

Lesso Group expects consolidation in China's plastic pipe sector

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: August 20, 2013 1:53 pm ET
Updated: August 20, 2013 1:56 pm ET

Post Your Comments


Back to story


More stories

Vi-Lux expands capacity, with room already laid out for future growth

April 15, 2014 2:00 pm ET

Vi-Lux Building Products Inc. just expanded its extrusion capacity by 15 percent — and while work crews were inside the Napanee, Ontario,...    More

Krahn Chemie acquires Italy's Pietro Carini

April 15, 2014 11:20 am ET

Germany's Krahn Chemie GmbH has purchased a majority share in Italy-based speciality chemical company Pietro Carini SpA.    More

Image

RKW buys Hyplast, folds into RKW Agri

April 15, 2014 11:13 am ET

RKW SE, a Germany-based films and flexible packaging group, has announced it has acquired Belgium's Hyplast NV.    More

JSW looks to improve equipment servicing in Europe through contract

April 15, 2014 11:09 am ET

Tokyo-based manufacturer of extruding machinery Japan Steel Works (JSW) has signed an agreement with a Dutch company to help it improve servicing on...    More

Polypipe shares rise on opening day of IPO

April 15, 2014 11:06 am ET

Polypipe Group plc saw its share prices rise during its first day of public trading on the London Stock Exchange, rising from 245 pence ($4.10) to 250...    More

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Automotive Market Review and Outlook 2014 The Americas

This 75-page report features in-depth analysis of the automotive industry for the Americas. It includes discussions of market trends, legislative/regulatory activity impacting production and threats as well as design strategies being implemented by the major automakers. Detailed charts and data tables outline North American automotive production over the last five years.

Learn more

Plastics Building & Construction Market Review and Outlook 2014 with MS Excel chart data

This report provides in-depth analysis of the plastic building and construction market for North America, including discussions of trends, opportunities, threats and the latest developments in construction trends that impact plastics processors.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events