SHUNDE, CHINA (Aug. 22, 2 p.m. ET) — China's largest plastic pipe maker, China Liansu Group Holdings Ltd, said its sales rose 37 percent in the first half of the year to 4.56 billion Chinese yuan ($712.6 million), although it warned of possible challenges as government austerity measures hit the property market.
Liansu, based in Shunde, Guangdong province, reported that profit for the period rose only 11 percent, to 536 million yuan ($83.7 million), held back by rising labor and administrative costs and significantly more spending on research and development.
Still, with China's market expected to keep expanding, the company said it planned unspecified additional production capacity, and noted that it raised $300 million in May with a sale of notes on the Singapore stock market.
The company opened a factory in Changchun, Jilin province, earlier this year, giving it 13 throughout China, with plans for a new factory in Shaanxi province to start production next year.
While it noted challenges in the property and credit markets, the firm told the Hong Kong stock market in an Aug. 19 filing that it expects continued solid growth, driven by China's increased urbanization, water conservation and efforts to replace steel pipes with plastic.
“With the acceleration of urbanization, where the urban population is expected to increase from 47.5 percent in 2010 to 51.5 percent in 2015, the demands for infrastructure construction is expected to increase thereby, driving the demands for plastic pipes,” the company said.
Liansu said it would work to enhance its sales networks, particularly outside its South China base where it derives about 70 percent of its sales, and it would continue to invest in research spending.
The company said it more than tripled research spending in the first half of the year, compared to the same period in 2010, going from 24.6 million yuan ($3.8 million) in first-half 2010 to 86.1 million yuan ($13.4 million) in the first half of this year.
It said boosting R&D was one of three strategic priorities, with a focus on same-floor drainage systems, metal-plastic composite pipes, solar heat collection pipes and irrigation systems.
It also said it plans to introduce new types of home building materials to diversify its product line.
Like many firms based in China's coastal regions like Guangdong province, the company said staffing costs rose substantially, increasing 40 percent for the period, while the total number of employees remained roughly steady, at a little over 7,000.
