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Zhejiang Glass: Consolidation prompts to prepare for mergers and acquisitions

Chinese glass manufacturer Zhejiang Glass plans to acquire rival glass manufacturers, sayingthat this is the time for mergers and acquisitions in the mainland“s flat-glass industry. The industry is i…

Chinese glass manufacturer Zhejiang Glass plans to acquire rival glass manufacturers, sayingthat this is the time for mergers and acquisitions in the mainland“s flat-glass industry. The industry is in the middle of a five-year consolidation plan aimed at increasing competitiveness and gaining economies of scale. Other sectors going through similar consolidation include power, non-ferrous metals and light industries such as breweries. One of the goals of the glass industry is to set up three to five main groups of flat-glass manufacturers which would control more than 50% of all flat-glass production in China. Beijing will let the free market decide which firms survive and allow smaller, unprofitable manufacturers to go bankrupt. There are more than 50 glass manufacturers throughout China, but almost 80% of them are unprofitable. Zhejiang Glass is one of the few profitable mainland glass manufacturers. In April, it reported a 29.8% increase in net profit for last year to CNY 212.06 million. In the company“s IPO prospectus, it said it planned to invest CNY 100 million in a joint venture to build two production lines to manufacture patterned glass and wired glass. However, regulations introduced last April removed the local government“s power to approve flat-glass production lines. Consequently, authorities in Jiangsu province, Zhejiang province and Shanghai approved nine new patterned and wired glass production lines while they still could, instantly making the market more competitive. Zhejiang Glass has dissolved its joint-venture agreement with Dynamic Goal Worldwide. Instead, it will invest the CNY 100 million into an ultra-thick float glass production line with a daily melting capacity of 600 tons. The float flat-glass market is less competitive as there are only seven production lines capable of producing 4,200 tons of ultra-thick float glass per day.

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