Zhejiang Glass: industry overcapacity hits 1H 2005 profits

Zhejiang Glass, the second-largest Hong Kong-listed mainland glassmaker by market value, said its 1H 2005 net profit was down 36% as the average sale price of its products fell 7% even though energy a…

Zhejiang Glass, the second-largest Hong Kong-listed mainland glassmaker by market value, said its 1H 2005 net profit was down 36% as the average sale price of its products fell 7% even though energy and raw materials costs were up. The company reported net profit of CNY 69.7 million (HKD 66.88 million) for the 1H 2005, down from CNY 109.9 million year-on-year. The company“s sales rose very slightly, to CNY 568.7 million from CNY 565 million for the 1H 2004. “We suffered from the overcapacity in the flat-glass industry,”chairman Feng Guangcheng said in a statement. The combination of static sales and rising costs hit gross margins, which fell to 26% from 35% last year. In response, Zhejiang Glass tried to boost production of higher valued added products including ultra-thin flat glass, which commands a premium. The company plans a capital spend of CNY 1.5 billion in 2005, with two-thirds of the sum going for a new soda-ash plant in Qinghai. “We [plan] to produce 200,000 tonnes this year and hope to achieve full capacity of 900,000 tonnes next year,” said chief financial officer John Chung. In total, the company plans to invest CNY 3 billion in the facility, enough to double its output to 1.8 million tonnes a year. “Some 30% of [the soda ash] will be used internally and the remainder could be sold to other glass manufacturers to boost total revenue,” Chung said.