Chairman of Ningxia Building Materials explained the secret of gross profit margin

According to wind statistics, among the 20 listed companies in the A-share cement and building materials category, Ningxia Building Materials [-0.86% Capital Research Report] ranked the top three in terms of sales gross margin of 28.4% in 2013; in the 2014 mid-year report, Ningxia building materials sales The gross profit margin has once again increased to 29.8%, making it one of the few companies in the industry to continue to rise in gross profit margin.

In the activities of the China Listed Company Association held recently in Ningxia and the Shanghai Stock Exchange “I am a shareholder – small and medium investors enter the listed company”, Yin Zibo, chairman of Ningxia Building Materials, described the company’s gross profit margin to the China Securities Journal reporter. Continue to improve the secret behind it. In the context of declining economic growth, sudden downward pressure on real estate investment, and overcapacity in the cement industry, extending the industrial chain, continuously improving energy efficiency and reducing efficiency, and using automation to reduce costs and increase efficiency have become the "tools" for Ningxia's building materials to expand against the market.

Extended industry chain

Ningxia Building Materials is the largest cement and concrete production enterprise in Ningxia. The company has excess cement production capacity in the region, and the market competition is becoming increasingly fierce. The sales price of cement continues to be sluggish.

According to Yin Zibo, China Cement's average capacity utilization rate in 2013 was 75%. As a regional product of “short legs”, cement has an effective radius of about 100 kilometers, so the company's market coverage is concentrated in Ningxia, Gansu and Inner Mongolia. In 2013, Ningxia's cement production capacity was 28.6 million tons, with a production and sales volume of 19 million tons. Among them, Ningxia building materials production of about 10 million tons, capacity utilization rate of about 74%, close to the national average.

Regarding how to resolve overcapacity, Yin Zibo said: "There are no more than three ways to resolve: through government guidance and national policies to relatively improve industry access thresholds, tightening new cement and concrete production capacity; cement as a regional product, should Actively give play to the leading and guiding role of large enterprises, and use market competition means to solve overcapacity; the state's environmental energy consumption indicators for the cement industry will be upgraded, prompting cement companies to upgrade their technology and management, and survive the inferior through market mechanisms."

One of the main ways to achieve excellence in the main business is to extend the existing industrial chain through mergers and acquisitions. On September 12, Ningxia Building Materials announced that it acquired a 49% stake in Ningxia Saima Kejin Concrete Co., Ltd., its holding subsidiary, for 198 million yuan. After the transaction was completed, the company's shareholding ratio increased from 51% to 100%. “Cement is an intermediate product, not an end product. The company has been studying the extension of the industrial chain. In 2009, Ningxia Building Materials began to lay down the industrial chain downstream, and acquired three concrete enterprises including the Racing Company.” Yin Zibo said. Ningxia building materials director Wu Xiong told reporters that concrete and cement are in the same industrial chain. If there are good concrete targets, we will not rule out the acquisition.

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