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China: glass makers results follow different paths

Two Chinese flat glass manufacturers showed widely differing fortunes in their interim results, in spite of rising product prices in the 1H, coming after a year of falling prices due to excess supply….

Two Chinese flat glass manufacturers showed widely differing fortunes in their interim results, in spite of rising product prices in the 1H, coming after a year of falling prices due to excess supply. Privately held Zhejiang Glass, which is China“s fifth-largest float-glass maker by melting capacity, posted a 54.24% year-on-year rise in net profit on 29 August to CNY 56.10 million, as turnover increased 29.45% to CNY 311.49 million. However, state-owned Luoyang Glass, the largest producer of flat glass in China, posted a first-half net loss of CNY 157.92 million, worse than the CNY 97.28 million loss recorded in the same period 2002. The result followed a 10% rise in turnover and a 10% increase in average sales prices. Zhejiang Glass, which has 70% of the market in Zhejiang province, saw its operating profit margin improve to 27.72% from 23.32 %. Its net profit fell 59.28% to CNY 86.33 million for the year. The company“s listing sponsor, Nomura Securities, estimated in a research report that Zhejiang Glass would record an interim profit of CNY 56.5 million. It said the average sales price of flat glass went up 20.2% to CNY 67.3 per tonne, while sales volume rose 24.9% to 270,000 tonnes. Zhejiang Glass has agreed to build a 600,000-tonne-a-year joint venture soda ash plant in Qinghai province in northwestern China, in which it will have a 90% stake, Nomura said. The project will cost CNY 1 billion, of which 25% will be funded by cash and the rest through bank loans. Luoyang Glass blamed its increasing losses on a CNY 110 million provision for bad debts, owed by associate firms. It also blamed a 4% rise in fuel cost. The H share was refused withdrawal of a CNY 23 million deposit placed at Guangdong Development Bank in 1998 on the grounds that a property company defaulted on a CNY 21.85 million loan guaranteed by Luoyang Glass. The company is appealing against a provincial court decision rejecting its claim for the money. The company also said it had advanced money or provided financial assistance totalling CNY 1.01 billion to other subsidiaries of its parent, China Luoyang Float Glass Group. At the end of June 2003, Luoyang Glass had CNY 140.21 million in cash, and its total loans-to-shareholders fund ratio was 99.9 %, up 11.3% from the end of last year.

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