HONG KONG (Aug. 21, 1:50 p.m. ET) — China Liansu Group Holdings Ltd., the country's largest plastic pipe maker, plans a significant expansion to meet growing domestic demand, with new factories slated for Hainan, Yunnan, Shandong and Guangdong provinces.
Liansu disclosed the investments in an earnings report filed August 20 with the Hong Kong stock market, where it said that sales increased 5.6 percent in the first half of the year, to 4.81 billion Chinese yuan (US$726.2 million), while profit was up 11.6 percent, to 598 million Chinese yuan (US$94.0 million).
That's actually significantly slower sales growth than the 31 percent the firm saw in 2011, a result of tougher conditions in China this year and the government's decision last year to tighten credit and slow the housing market.
But the company said overall prospects for plastic pipe remain good, pushed by China's general trends toward increased urbanization, construction of affordable housing, investments in water conservation and revamping of outdated pipe networks.
Liansu, based in Foshan, Guangdong province, did not provide details of the additional expansion in its filing but said the four facilities are part of a “new phase of capacity expansion… to ensure that the market demands are being met.”
The company said it expects to have production capacity between 1.65 million and 1.75 million metric tons by the end of the year. In recent years it has been expanding heavily beyond its base in Guangdong.
“Stable growth in the demand for plastic pipes is still expected given further advancement of China's industrialisation, urbanisation and informatisation, further expansion of domestic demand and ongoing implementation of major construction projects in affordable housing, urban infrastructure and new agricultural villages,” the company said. “The Group is fully confident that it will enjoy sound and stable business development in the second half of 2012.”
The company said it was able to maintain profit growth in spite of the sales slowdown because it maintained cost controls, adopted an “optimized” pricing strategy and attracted new customers.
The volume of pipe and fittings sold rose 9.1 percent in the first half of the year, compared to the same period in 2011, to 470,000 metric tons, even as average selling prices fell, Liansu said.
Other focuses for the immediate period include expanding its national sales network and trying to better tap international markets, along with continuing to diversify into related plastic construction products such as plastic-steel doors and windows and kitchen and sanitary products, the company said.