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China Glass: profit to fall for 2005 but rebound in 2006

China Glass Holdings Ltd. may record a “substantial decrease” in profit for 2005, as the Chinese glass sector hit a downturn in growth, the firm said on 15 February 2006. The company said it reported …

China Glass Holdings Ltd. may record a “substantial decrease” in profit for 2005, as the Chinese glass sector hit a downturn in growth, the firm said on 15 February 2006. The company said it reported a profit of CNY 64.82 million (USD 8.1 million) for 2004 and CNY 16.03 million for the 1H of 2005. The slowdown in 2005 affected the operating performance of companies in the industry across the board, China Glass said without giving financial details. “The industry is undergoing a reshuffle, as some low efficiency and small players will be knocked out and be acquired,” said China Glass chairman John Zhao, after announcing deals worth CNY 416 million ( USD 51.7 million) to buy seven domestic glassmakers. Chinese glass production grew less strongly in 2005, with flat glass output amounting to 175 million tons, up 15% on a yearly basis, compared to a 20% growth rate in 2004. Growth in glass demand was lower, at 4.8% year-on-year, leading to over-supply. The profit margin for glassmakers also decreased in 2005 because of a surge in costs and a decrease in prices, squeezing a number of smaller firms to the verge of bankruptcy and heralding a consolidation of the sector. Central government measures to control the rampant expansion of the construction and property sectors were blamed for the slow down. But Mr. Zhao said he expected the industry to rebound in 2006 with growth in demand expected to be in double figures.

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