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China Ceramics Co., Ltd. Message Board

  • clauscampen clauscampen Jul 27, 2012 11:31 AM Flag

    Capacity Increase - low utilization

    Today the company announced that the facility in Hengdali is connected sufficiently to the power grid in order to increase production for 10m sqm to 30m sqm. However, they are only using 14m sqm capacity of it.

    A) So the factory is working at less than 50% capacity. This doesn't sound good for the sales development
    B) In August 2011 (see press statement below) they stated that they would finish the expansion to 30m sqm by the end of 2011. So it is not only more than half a yerar late, but also they do not require this capacity.

    If they do not require the capacity why do they not build less and give money back to the shareholders, i.e. a dividend? This doesn't smell good.

    "After the completion of Phase II at Hengdali by the end of 2011, the company expects to have a total annual production capacity of" ... "30 Mm2 of total capacity from the Hengdali facility. The expansion at Hengdali will primarily consist of the construction of additional plant facilities, the installation of specialized state-of-the-art equipment and the construction of an administrative building and staff quarters." (8/2011)

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    • About your statement B - as they said in their announcement, CCCL completed "their share" of the expansion already Q4/2011 and Q1/2012 so if it was late, it was matter of months. Electricity was the problem and I suppose that's kind of business which is strictly controlled (and probably run) by the government so if they're late, there's not much you can do about it.

      And there's always a delay between the investment decision and while it's in operation. It's nothing fishy, economical situation changes rapidly! :)

    • Claus, as they are able to generate $40mm per annum, who cares if they have some capacity spare for growth....
      That is 2 dollar cashflow per share per annum.

 
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