Caifinance News October 29th (Editor Li Xiang Intern Editor Sun Pengpeng) Recently, the cement and building materials industry has faced significant performance fluctuations.

As an industry leader, Xinjiang Tianshan Cement Co., Ltd. (referred to as Tianshan Cement, 000788.SZ) recently announced a huge loss in its third-quarter report, attracting attention.

According to Tianshan Cement's disclosed third-quarter report, the company's revenue for the first three quarters was 61.46 billion yuan, a year-on-year decrease of 23.55%. The net income recorded a loss of 3.748 billion yuan, a year-on-year decline of 7471.1%, making it the 'loss king' among the industry bond issuers who have already disclosed their third-quarter reports. However, Tianshan Cement's stock price has risen significantly since the '9.24 market', with a cumulative increase of 47.18% as of yesterday's closing, forming a clear contrast with its third-quarter performance.

Public information shows that Xinjiang Tianshan Cement mainly manufactures and sells cement, concrete, and aggregates, with cement revenue accounting for over 60%, and is a subsidiary of China National Building Materials Group Co., Ltd., rated AAA. Currently, there are 4 outstanding bonds totaling 6 billion yuan, with 3 billion yuan maturing within 1 year.

Regarding the reasons for the loss, the company explained in the third-quarter report that from January to September 2024, the company sold 165.3 million tons of cement clinker, a decrease of 15.52% year-on-year; sold 53.15 million cubic meters of concrete, a decrease of 0.73% year-on-year; sold 93.36 million tons of aggregates, a decrease of 9.22% year-on-year. From January to September 2024, the company focused on meticulous management, cost reduction, and saw varying degrees of reduction in costs for cement and commodity concrete compared to the previous year. However, the significant year-on-year decrease in market selling prices impacted operational efficiency, leading to a decline in performance.

Of note, as the parent company of Tianshan Cement, China National Building Materials Co., Ltd. also disclosed its latest third-quarter financial data. The data shows that in the third quarter, China National Building Materials Co., Ltd. had a total revenue of 13.55 million yuan, a decrease of 15.6% year-on-year, with a net loss of 0.684 billion yuan, a 129.08% year-on-year decline. The EBIT indicator, reflecting debt-paying ability, dropped to a historic low of 2.21. There are 32 outstanding bonds totaling 38.6 billion yuan, with 22.1 billion yuan maturing within 1 year. Repaying solely based on operating income would impose significant debt repayment pressure.

United Credit Rating pointed out in its July rating report that the cement industry exhibits clear cyclical properties. Currently, the structural overcapacity contradiction in the cement industry remains prominent. Although the year-on-year decrease in the procurement price of raw material coal has reduced cost pressures for companies, Tianshan Cement still faces a significant issue of low product capacity utilization, compressing its profit margins. The rating agency also mentioned that the company is exposed to potential risks of accounts receivable, inventory, and goodwill impairment, and the increase in construction projects has added to the investment risk in the current low-business sentiment environment.

The decline in the company's third quarter report data also to some extent corroborates the views of the above rating agencies. From the third quarter data perspective, the company's total assets are 296.466 billion yuan, total liabilities are 10.6215 million yuan, and the asset-liability ratio reaches 67.40%, with interest-bearing debt of 117.617 billion yuan still at a historical high. The company's accounts receivable turnover is only 3.62 times, significantly lower than industry peers such as conch cement at 28.1 times, huaxin cement at 18.54 times, and tangshan jidong cement at 15.12 times, facing certain accounts receivable recovery risks. In terms of solvency indicators, xinjiang tianshan cement's short-term solvency has been consistently weak, with a current ratio of 0.62. The interest-bearing debt ratio is 40.53%, and the debt repayment pressure remains high. Affected by the sharp drop in net income, the interest coverage ratio has turned from positive to negative, falling to a new low of -0.41 times for the same period.

However, as the most important cement operation entity under cnbm, United Credit believes that there is significant external support for the company. In terms of financing, by the end of 2023, cnbm provided 25.798 billion yuan to the company for borrowing support. Cnbm charges interest from the company's financial support at market-based pricing, not exceeding the cost of external financing for the company. In terms of channel support, cnbm provides the company with internal process green channel support, reducing approval processes, improving approval speed, and significantly enhancing the company's operational efficiency.

It is worth noting that despite xinjiang tianshan cement's bleak operational performance, the company's stock price has continued to rise. The cumulative increase from September 24th to the present exceeds 47%. From a news perspective, according to information from China Cement Net, starting from September 27, 2024, the cement clinker prices in the East China region are planned to be significantly increased by 100 yuan/ton.

Market analysts pointed out that unlike previous small price increases, this time the price increase is during the industry peak season and the magnitude of the increase is significant. Cement prices in many parts of China, including Central-South, Northeast, and East China, have recently seen varying degrees of increase. A dongxing research report pointed out that the current national cement price level has exceeded the same period last year, with a year-on-year increase of 2.97%, which is expected to support the company's subsequent revenue recovery.