Good Growth at Taiwan’s No. 2 Cement Producer
Background
Asia Cement Corporation is the second-largest cement producer by capacity in Taiwan, ranked no. 10 in China, and in the top 100 globally.
Its main factories are located in China, where the majority of the country’s demand comes from, but it also produces domestically. The consolidated group has subsidiaries in power and stainless steel.
Business Description
ACC is the second-largest cement company in Taiwan, and the 10th in China ranked by capacity. ACC’s main subsidiaries are Asia Cement (China) (743 HK), Chiahui Power and Yuan Long Stainless Steel, the two latter are involved in energy production and stainless steel production.
ACC also holds a 22% stake in China Shanshui Cement Group (691 HK), 39% in U-Ming Marine Transport (2606 TT), and 24% in its majority shareholder Far Eastern New Century (1402 TT). Equity income grew by 168% YoY in 1H18 and accounted for 37% of 1H18 net profit.
China remains the biggest cement producer in the world, with estimates for national annual production of 2.1-3.5bn tons. The Chinese gov’t environmental policies have restrained cement production supporting prices.
Cement is just over 3/4 of sales, while the rest is accounted for by electricity, stainless steel and others. The group’s production facilities are in China, with an annual capacity of 33m tons, and in Taiwan with 5m tons. Less than 1/3 of Taiwanese production is exported, while all of the Chinese production is shipped domestically into the regions of Sichuan, Hubei and Jiangxi in the Yangtze River basin area.
Leadership
Douglas Tong Hsu was elected Chairman of ACC in 1975. Additionally, he is the Chairman of Far Eastern New Century Corporation (1402 TT), Far Eastone Telecommunications Company Limited (4904 TT), and Far Eastern Department Stores Limited (2903 TT). He holds a Master of Economics from Columbia University, US and an Honorary Doctor degree from Chiao Tung University, Taiwan.
Kun-Yen Lee has been the President of ACC since 2005. Furthermore, he also holds the position of Director at U-Ming Marine Transport Corporation (2606 TT). He has more than 40 years of experience in the cement industry.
World Class Benchmarking
Profitable Growth had been in a declining trend until the past 12 months when the rank improved to #6 form #8. In the most recent period, ACC ranked among the top 474 out of 790 large Materials companies worldwide.
Profitability has ranked below average since 2015. Growth has been improving since 2016 and ranked at #3 in the past 12 months.
Asset utilization has consistently stayed at the worst rank, which differs from Profit margin that has ranked above average for the whole time period. In the past 12 months, ACC’s Profit margin had improved to a #2 rank.
Sales growth dropped to #9 in 2016 but has kept improving since to #3 in the most recent period. Margin change had stayed at #9 for three years until it improved to #4 in 2017 and further to #2 in the past 12 months.
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