Huaxin Cement Purchase Sanyuan Company To Integrate Hubei Market

On the evening of November 29th,

According to the announcement, the registered capital of Sanyuan company is 80 million yuan, and Lv Youfu, general manager of Sanyuan company, owns 42.5% of holdings. Hubei Jing Lan group India Cements Limited (hereinafter referred to as Beijing Lan cement) has a 57.5% stake. After the acquisition is completed, Sanyuan company will become a wholly owned subsidiary of Huaxin Cement.

Huaxin Cement has coveted the Jing Lan cement for a long time. In July 2009, Huaxin Cement Board announced that it planned to buy Jing Lan cement for 683 million yuan to 60% stake in the new company.

As a consideration, Jing Lan cement intends to inject all the assets owned by 3 cement production companies such as Hubei Yongxing, Hubei Jing Lan and Yunmeng Yongxing, and 65% of the mining rights owned by Jingshan Qinglong Mountain Mining Development Co., Ltd. for 1 billion 50 million yuan into the new company.

However, the acquisition ended in failure. In the first quarter of this year, Hua Xin Cement announced that, due to the failure to complete the acquisition within the agreed time limit of December 26, 2009, Jing Lan cement proposed to suspend the implementation of the relevant cooperation agreement.

The acquisition is seen as the first step in the integration of Huaxin Cement and Hubei cement market. Sanyuan company has two new dry process cement production lines, 1500T/D and 4000T/D, with limited capacity.

Announcement revealed that Sanyuan company achieved operating income of 140 million yuan in the first three quarters and a net loss of 45 million 480 thousand yuan.

Hua Xin Cement said the acquisition of Sanyuan company is one of the steps to integrate Hubei cement market.

At present, the company has allocated two cement production bases in Huaxin Yichang and Huaxin Zigui in Yichang, Hubei. After completing the acquisition of Sanyuan company's equity, it is conducive to consolidating the market position of the company in Yichang.

According to the announcement issued by Huaxin Cement, the company also intends to acquire 70% stake in Fangxian diamond Cement Co., Ltd., located in Shiyan, Hubei.

Haitong Securities analyst Pu Shilin believes that about half of the company's revenue comes from the Hubei market, and the profitability of the Hubei market has a decisive impact on the company's performance.

Although the above two acquisitions involve only about 3 million tons of cement production capacity, the company will not exclude further consolidation of the Hubei regional market, which will be conducive to the improvement of market concentration and the recovery of profitability.

In addition, the company has made third adjustments to the non-public offering programme. According to the latest non-public issuance plan released on the evening of 29, the validity of the scheme will be extended for 1 years to December 16, 2011.

At the same time, the number of shares issued will be adjusted to 102 million shares from the previous 136 million shares. The issue price will be adjusted from no less than 20.29 yuan / share to no less than 19.02 yuan / share, and the amount of fund raising will remain unchanged at no more than 1 billion 906 million yuan.

Huaxin Cement is one of the largest cement production enterprises in Hubei province. As of the first half of 2010, the annual cement production capacity of the company is close to 60 million tons. Switzerland Holcim group, one of the largest cement manufacturers in the world, has 39.88% stake in Huaxin Cement's largest shareholder.