China National Building’s Profit Rises 66 Percent on Expansion

China National Building Material Co. (3323), the nation’s second-biggest cement maker, said profit rose 66 percent last year as acquisitions in the country’s biggest cement markets increased sales.

Net income increased to 1.51 billion yuan ($221 million), or 0.68 yuan a share, in the year to Dec. 31, from 912 million yuan, or 0.43 yuan, a year earlier, the company said today in a statement to the Hong Kong stock exchange. Sales more than doubled to 26.4 billion yuan from 10.5 billion yuan.

China National, known as CNBM, more than tripled production capacity in 2008 as it bought plants in southeastern China and also sold the material at higher prices than a year earlier, according to Michelle Leung, an analyst at CIMB-GK Securities (HK) Ltd. A 4 trillion-yuan government stimulus package is also increasing demand for the material to build roads, railways and other infrastructure, President Cao Jianglin said in February.

“Last year, cement prices rose a lot, and CNBM expanded aggressively,” Leung said in Hong Kong said before the announcement. “Sales volume will be the major driver to substantial earnings growth.”

Beijing-based CNBM fell 2.4 percent in Hong Kong trading to close at HK$12.98 today before the announcement. The stock has gained 39 percent this year, outpacing a 6.2 percent increase in the benchmark Hang Seng Index.

The average selling price of cement rose 22 percent to 232.1 yuan a ton during the year from 2007, the company said today.

China’s 4 trillion yuan package to stimulate the economy has boosted domestic demand and led to “consolidation, restructuring and management integration opportunities to large conglomerates in the building materials industry, such as CNBM,” the company said.

Stimulus Spending

CNBM has won orders to supply cement to highway and railway projects in the central Hunan province, benefiting from the stimulus, according to Cao. The company set up a venture to pursue acquisitions in northern China, it said March 6.

Anhui Conch Cement Co., the largest maker of the material in China, this month said sales jumped 15 percent in the first quarter, indicating that a recovery is starting. Cement demand could grow 6 percent this year, Anhui Conch had said.

To contact the reporter on this story: Lee Spears in Beijing at lspears2@bloomberg.net.

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net.