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M & A opportunities in cement product industries such as permeable brick cement pipes

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更新时间:2018年07月14日00:50:36 打印此页 关闭 Hits: 1200 Updated: July 14, 2018 00:50:36 Print this page Close
Market share and pricing power are key

   Host Long Zhouyuan:

Hello, welcome to the "Reporter's Interview". This is Long Zhouyuan. In this issue, Caixin reporter He Chunmei interviewed Mr. Song Zhiping, chairman of China Construction Materials Corporation.

Song Zhiping, born in 1956, formerly served as the director of Beijing New Building Materials General Plant and chairman of Beijing New Building Materials Group Co., Ltd., and was elected as the 2011 "China's Most Influential Business Leader" list.

Under the leadership of Song Zhiping, China's Building Materials Group has completed a historical leap from 10 billion to 100 billion yuan in total operating income and property, contributing to the structural adjustment of the building materials profession and industrial promotion. In today's program, Caixin reporter He Chunmei talked to Song Zhiping, discussing the strategy of restructuring Southwest Cement of China's building materials, and the key factors that enterprises should grasp when merging and restructuring.

In December of last year, China ’s building materials announced in Chengdu that “Southwest Cement Co., Ltd.” was officially established. The company ’s plan with a registered capital of 10 billion yuan will take about two to three years to reorganize and combine in Yun, Gui, and Sichuan. The cement production capacity of one city in Chongqing and three provinces exceeded 100 million tons, accounting for 20% -25% of the market share in the southwest region, becoming the largest professional cement company in the region.

However, before the reorganization, driven by the construction of many infrastructures in the aftermath of the Sichuan earthquake, the cement demand in the southwestern region increased dramatically, attracting many investors. The rapid expansion of cement production capacity in the southwestern region resulted in overcapacity, low concentration, and vicious competition. A good time to plan a reorganization.

Before entering the Southwestern Mall, China's building materials mainly promoted the joint reorganization mainly through their subsidiaries, China United Cement, South Cement, and North Cement. They have successfully established three major strategic areas in the Huaihai Economic Zone, Southeast Economic Zone, and Northern Region. There are more than 200 cement companies with a production capacity of 220 million tons.

   Caixin reporter He Chunmei:

Let's start with a recent hot topic. First, the joint reorganization of China's building materials and Southwest Cement. Could you tell us about the current development status?

   Song Zhiping, Chairman of China National Building Materials Corporation:

Southwest Cement has just formed a company in December of the previous year. Now Southwest is developing very fast. Now the capacity of Southwest Cement to be consolidated has now reached more than 60 million tons. After signing the contract, it is about 80 million tons to enter. If all the companies with cooperation intention are put together, it would be about 160 million tons. Therefore, the reorganization speed of Southwest Cement is faster than that of South Cement. I expect that by June of this year, the combined production capacity will exceed 100 million tons. The three provinces and one city in the southwest have a very reasonable overall layout and rapid development. The local enterprises are also very responsive. We are also very willing to join the southwest cement.

   Caixin reporter He Chunmei:

According to our understanding of the cement industry in the southwest region, perhaps the business owner may not be as sophisticated as eastern enterprises. Some online accounts say that the restructuring of southwest cement is more difficult, for example, there are more competition competitors. For example, some cement companies still have a surplus and earn money. They are reluctant to sell the company, and their funding channels are relatively small. If the cement companies are sold to us, there may be no funding channels. . What do you think of this statement?

   Song Zhiping, Chairman of China National Building Materials Corporation:

As I understand the situation is not yet the case, the construction of Southwest Cement's grand plan is in the aftermath of the Wenchuan earthquake. After the Wenchuan earthquake, the price of cement in Southwest China was very high, so at that time, it went into a lot of cement factories, but after that, there was a big competition. The cement in many provinces, such as Chengdu, Chongqing, It has dropped to 200 yuan a ton. In this case, they basically have no surplus, and they are all at a loss. As far as the owners of Southwest Cement are concerned, they have the desire and demand for reorganization, and they are violent.

That's not to say that they are reluctant to sell. Of course, because China is restructuring now, like China ’s southern cement, China ’s joint cement, and northern cement, we see that the restructuring has good benefits in the future. In this way, the cement owners ’expectations for prices are relatively high, compared to when we restructured the south They changed psychologically. So in this case, the time for us to form Southwest Cement is higher than the time for South Cement and China United Cement.

In fact, at the time of the south cement reorganization, various difficulties also existed. I always said that reorganization was the most artistic operation and perhaps the most difficult operation. So most of them are doing "human" work, and the difficulty is definitely there, but now, overall, the reorganization of Southwest Cement is relatively smooth.

   Caixin reporter He Chunmei:

Aside from your restructuring experience, are there any examples of the most thrilling and perhaps the most difficult business owners for you?

   Song Zhiping, Chairman of China National Building Materials Corporation:

To say that it is more thrilling, in fact, the reorganization of Xuzhou Conch was still relatively difficult at that time. We have to get it from Conch Group, a 10,000-ton line inside such a giant. But if we do n’t take it at that time, there will be a fierce competition between that line and the Huaihai Cement of China United Cement around us at that time, so we need to take it down. At the time when I was doing that operation, I felt that reorganization was still not reorganization, which is the battle of survival and death of China's building materials in cement. It turns out that we are right to win him today. On the other hand, when we arranged the time for the south side cement, we all knew that there was a famous "Wangzhuang negotiation". In fact, they are four central enterprises. At that time, they all had some foreign capital. Multinational companies were staring at them, some paid deposits, and some passed due diligence. But at that time, China's building materials were still determined Only when they are arranged together can the subsequent 150 companies be arranged together. So to do this, some media called "tiger mouth extraction."

Of course, it ’s not like “extracting tiger teeth”, but at least his importance is our battle.

"Wangzhuang Negotiations" is very important for the south side cement that we formed now with 120 million tons. In fact, this time we went to the southwest, and this is also the case. We have won a few of us, such as Leeson, Kehua, and so on. We still have a few. A very important (strategy) of our country's architecture is to focus on the region and the profit zone of the construction center. In other words, we do it in a large area, preferably in a small area in a large area, add our market share in a small area, and add our pricing power. Since cement is a broken leg product, its transportation distance is only 150 kilometers, so we think that cement cannot be distributed in a dispersed manner, not in a line, but in pieces. The filming is time-consuming, there are still films in the film, and there are areas in the area. Therefore, we expect to set up a central profit zone in the southwest. Because the southwest and south sides of the cement are not very convenient, relatively speaking, its traffic conditions are not convenient, and location cutting is more fierce. This is a big difference between the southwest and the south-it's about building a central profit zone.

   Caixin reporter He Chunmei:

As in the world's mergers and acquisitions, in terms of preservation, 80% are lost. Why can our building materials succeed?

   Song Zhiping, Chairman of China National Building Materials Corporation:

The M & A loss rate is 80%, which was once said. Probably now 50% of international mergers and acquisitions are successful. The success rate has greatly improved, but even so, M & A is still an extremely risky activity. From the perspective of China's building materials, the advice from this company was reorganized all the way, and the reorganization constituted a civilization of his livelihood. Therefore, in China's building materials, its civilization is used to mergers and acquisitions. On the other hand, he has a clear strategy, not for big and big, nor for more and more, but for surplus. There are four principles for China's building materials mergers and acquisitions: top of the list, are you satisfied with our strategy, as we just said, is it in our area, if it is not in our area, even if you make money, do not, because of Companies do not form synergy effects. Secondly, we expect that the companies we merge with and the original companies will have synergistic effects, just like the Xuzhou Conch I just mentioned, and the synergies between the companies around me. The so-called synergy effect will not only make money after mergers and acquisitions, but the original system will also increase and make money. Therefore, mergers and acquisitions often have some bargaining, but who will come out of the bargaining? It should be from the mall. In fact, I think I paid more, but it was not from me. It was from the mall. Before the merger, we fought The price is low, and after the merger and acquisition, the price rationally recovers and it will make money.

   Caixin reporter He Chunmei:

In fact, M & A fundamentally, his most important earnings nature is also to reach pricing power, right?

   Song Zhiping, Chairman of China National Building Materials Corporation:

Yes.

   Caixin reporter He Chunmei:

From our point of view, what are the requirements for the cement industry to reach pricing power? Because the price was low before, vicious competition.

   Song Zhiping, Chairman of China National Building Materials Corporation:

Correct. Yes, because from the perspective of the development of the economy, the beginning of the time is that we are all independent battlefields, but the mall started the competition, and then we have no benefit throughout, and finally began mergers and acquisitions, reorganization. Merger and reorganization are actually to deal with two issues. One is planning and efficiency. Only planning can be effective. The second is to deal with the disorderly competition, and then grasp the right to speak professional, perhaps to add their own pricing power. This is our original intention of mergers and acquisitions. According to general logic, this must be the case, and eventually it will make money. In fact, we also know that even if you carry out annexation and reorganization and joint reorganization, in the end you will not be able to organize the whole country. In the whole joint reorganization of China's building materials, it is based on three points of the country, which is to do it by itself and let others do it, but in my area, I am the main, and in your area, you are the main one. There should be Such a leading approach. China's building materials now think that products such as cement should occupy about 40% of the market share in the central area in order to have an impact on the price of this area. That is, as long as you occupy 40 hours, this talent.

In fact, the world's enterprises are nothing more than fighting for market share and pricing power, and this is nothing that can be avoided.

   Host Long Zhouyuan:

That's all for this issue of "Journalist Interview", thank you for watching, goodbye!

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