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Shanshui Cement Announces 2011 Annual Results

Profit Attributable to Equity Shareholders Surged 127.3% to RMB 2.225 billion

Captures Opportunities from Industrial Consolidation to Expand Market Reach

Optimises Business Layout to Enhance Market Leadership

HONG KONG, March 26, 2012 /PRNewswire-Asia/ —

Financial Highlights (Audited)

(RMB Million) For the 12 Months Ended 31 December
2011 2010  Change
Revenue 16,862 11,854 +42.2%
Gross Profit 5,079 2,550 +99.2%
EBITDA 4,784 2,534 +88.8%
Profit from Operations 3,856 1,726 +123.4%
Profit before Taxation 3,254 1,363 +138.7%
Net Profit for the Year 2,312 1,005 +130.0%
Profit Attributable to Equity Shareholders of the Company 2,225 979 +127.3%
Basic Earnings per Share (RMB) 0.79 0.35 +125.7%

China Shanshui Cement Group Limited (“Shanshui Cement” or the “Group”; HKEx: 00691), the largest cement enterprise in Shandong and Liaoning Provinces in China, announced its audited annual results for the twelve months ended 31 December 2011 prepared in accordance with International Financial Reporting Standards.

During the Reporting Period, the Group achieved outstanding year-on-year revenue growth of 42.2% to RMB16,862 million. Gross profit surged by 99.2% to RMB5,079 million and profit attributable to equity shareholders of the Company soared 127.3% to RMB2,225 million. Basic earnings per share reached RMB0.79, up 125.7% compared with last year. The Board recommended the payment of a final dividend of HKD 0.242per share for the year ended 31 December 2011.

Mr. Zhang Bin, Vice Chairman and General Manager of Shanshui Cement, said: “In 2011, we were able to seize the opportunities brought about by the Government’s supportive policy of increasing investments in infrastructure, accelerating the urbanisation and the construction in rural areas as well as restricting additional and eliminating obsolete cement production capacity. We have leveraged our integrated competitive strength in market presence, scale of operations and cost-effectiveness by adhering to a marketing strategy of ‘clinker for profits and cement for market expansion’. Besides, the Group vigorously implemented overall budget management to further reduce costs and control expenditures, and achieved remarkable operating results.”

During the Reporting Period, the Group’s sales revenue increased by 42.2% to RMB16.862 billion, which was mainly attributable to the increase in the sales volume and selling prices of cement. For individual product segments, cement revenue amounted to RMB14,124 million, a year-on-year growth of 52.3%, and clinker revenue amounted to RMB1,887 million, a year-on-year decrease of 2.8%. Concrete revenue amounted to RMB243 million, a year-on-year growth of 30.6%.

Benefited from industry consolidation and the Group’s improved market control in the regions, the prices of cement and clinker soared throughout the year. During the Reporting Period, the Group’s average unit selling price of cement in the Shandong area was RMB299.0 per tonne, a year-on-year rise of 25.6%, while that in Northeastern China was RMB 282.7 per tonne, a year-on-year climb of 25.0%, and the average unit selling price of cement in Shanxi was RMB 298.3 per tonne, a year-on-year decrease of 5.3%. With the gradual expansion of its production capacity in the Shanxi area, the Group should have more pricing power in this market. It is expected that the selling price of cement in Shanxi area will maintain a steady and increasing trend in the near future.

The Group’s sales volume of cement amounted to 47.943 million tonnes, a year-on-year growth of 21.9%, while that of concrete was 0.94 million m3, a year-on-year increase of 19.4%. A number of factors contributed to this growth in addition to the Company’s strong market presence and the continuous expansion of the production capacity. These included the Government’s restrictions on the addition of cement capacity, the phasing-out of obsolete cement capacity, and the continuous demand for cement from infrastructure construction projects and the property development industry, particularly for the construction of affordable housing. During the Reporting Period, the Group sold 7 million tonnes of clinker, a volume which was 28.9% lower year on year, however due to the sharp increase in unit selling price, the sales revenues of clinker remained at a similar level.

During the Reporting Period, the Group added 18.0 million tonnes of cement production capacity (including those under trial operation) and 6.40 million tonnes of new clinker cement capacity. As at the end of the Reporting Period, all suitable clinker production lines had been equipped with residual heat generation facilities, and the total installed capacity amounted to 182.5MW. In addition, as at the end of the Reporting Period, the total capacity of the Group’s commercial concrete production lines amounted to 8.60 million m3. Furthermore, a number of clinker production lines (equipped with residual heat power generation facilities), including JinCheng Shanshui Heju, Lvliang Yilong, Shuozhou Shanshui, Linfen Shanshui in Shanxi and Yingjisha Shanshui in Xinjiang, and a number of cement grinding production lines were under construction. With more new production lines commencing operations, the Group will further strengthen its leading position and should stand out in the cement markets in Shandong, Liaoning and Shanxi provinces and eastern Inner Mongolia.

Mr. Zhang said, “In 2012, under the basic tone of ‘steady growth’ in its macro-economic policies that set forth by the Government, the cement industry is expected to benefit from the strong demand driven by increasing urbanisation, and construction of infrastructure in new rural areas, affordable housing and water facilities. The restrictions on new capacity and more rapid elimination of obsolete production capacity should continue to optimise the balance of supply and demand within the industry. In our view, the vicious price competition will be substantially decreased as the industry further consolidates, and large enterprises will play a leading role in prices, making the industry more profitable.”

Looking ahead, Mr. Zhang concluded, “In 2012, the Group will adhere to the guidelines of ‘standardisation, concentration, penetration and developments’ and will take advantage of opportunities brought by the Government’s policy for supporting mergers and reorganisations initiated by cement conglomerates. We will also fully leverage our regional companies in staying close to and keeping abreast of the market, speed up market analyses, identify suitable targets for mergers and reorganisation and carry out acquisitions at the proper time. The Group will optimise the operations and reach of its cement business through implementing comprehensive budget management, improving internal procedures, and enhancing efficiency in execution, while aiming to improve market control and market share. In addition, the Group will also continue to upgrade and enhance its existing companies. We will further optimise the technologies of our production lines, improve product quality, lower production costs and realise the rapid growth of our operating businesses through scientific and effective technological innovation.”

About China Shanshui Cement Group Limited (“Shanshui Cement”)

Shanshui Cement is the largest producer of cement in Shandong and Liaoning Provinces and ranks among the top three cement producers in China. The Group operates production lines and cement grinding lines that adopt the most advanced suspension pre-heater dry process. The Group will continue to expand its business through acquisitions and construction of its production lines. As of 31 December 2011, the Group’s total production capacity of cement and clinker reached 84.24 million tonnes and 37.35 million tonnes respectively. Shanshui Cement is currently a constituent stock of the Hang Seng Composite Index Series, Hang Seng Composite MidCap Index Series and Properties & Construction Industry Index Series. It has also been included in the MSCI Global Standard Indices — MSCI China Index in November 2011 and the Hang Seng Mainland 100 on 5 March 2012, marking the capital market’s recognition of the Group’s performance, including its positioning, business and financial strength. The inclusion of the Group in this index series reaffirms the Group’s reputation and position in the international capital markets.

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Source: China Shanshui Cement Group Limited