The hottest Sany and XCMG want to raise nearly $5b

2022-08-15
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Sany and XCMG want to raise nearly US $5billion to expand production

Sany and XCMG want to raise nearly US $5billion to expand production

China Construction machinery information

Guide: on September 5, Sany Heavy Industry and XCMG machinery, the two largest construction machinery enterprises in China, simultaneously released their prospectus on the Hong Kong stock exchange, and the two companies plan to raise nearly US $5billion in total, Most of them use some construction companies to open up this market in third tier cities and other areas to expand production capacity. Due to the increasingly fierce market competition, with the expansion of production capacity and sales of the two companies

on September 5, Sany Heavy Industry and XCMG machinery, the two largest construction machinery enterprises in China, announced their prospectus at the Hong Kong Stock Exchange at the same time. The two companies plan to raise a total of nearly $5billion, most of which are used to expand production capacity

due to the increasingly fierce market competition, the company's accounts receivable soared with the expansion of production capacity and the substantial growth of sales revenue of the two companies

how to digest the expansion of production capacity

since April this year, the explosive growth momentum of the construction machinery industry has slowed down, and the sales volume of some construction machinery products has continued to decline month on month. According to the statistics of China Construction Machinery Industry Association, the sales volume of loaders, bulldozers, excavators and truck cranes in July increased by 2.2%, decreased by 20.8%, decreased by 14.5% and decreased by 33.2% year on year respectively, and decreased by 16%, 25.5%, 25.3% and 31.1% month on month respectively

however, the two companies do not seem to be afraid. Moreover, both companies believe that the current production capacity of the company cannot meet the future market demand, so they must expand production capacity on a large scale. Sany Heavy Industry and XCMG machinery are the industry leaders in the concrete machinery and crane machinery markets respectively, and Sany Heavy Industry is also the leader in the hydraulic excavator industry

according to the prospectus of Sany Heavy Industry, the company plans to expand the production capacity of its main products by 5-7 times in the future. For example, the production capacity of concrete machinery will be increased from the current 5490 to 31500, the production capacity of excavators will be increased from the current 6750 repeatedly, and the air discharge platform in the pipeline will be increased to 30200, and the production capacity of truck cranes will be increased from the current 1050 to 7820

XCMG machinery currently has 9 production facilities under construction to manufacture cranes, loaders, concrete machinery and parts. The company is installing additional production lines for hydraulic parts to manufacture hydraulic cylinders. The annual production capacity is set at 12000, of which the current production capacity of cranes is 11700, which will increase to about 26000 in the future

for the large-scale production expansion of the two companies, an expert from China Construction Machinery Industry Association told China business news that if other construction machinery enterprises, such as the structural parts of CFRTP, are expected to gradually replace CFRP products with this large-scale production expansion, the market will be seriously oversupplied in the next five years, and it is impossible to digest such a large demand

according to the data of Northeast Securities, from 1998 to 2009, the average annual compound growth rate of the sales revenue of the construction machinery industry was 20.07%. The data of China's construction machinery trade show that from 2005 to 2010, the compound annual growth rate of China's construction machinery sales revenue was as high as 30.1%

the above experts of China Construction Machinery Industry Association said that it is expected that the growth rate of the construction machinery industry during the "12th Five Year Plan" period will be lower than that during the "11th Five Year Plan" period, coupled with the usual accurate protection of experimental machines. Under the condition that enterprises generally significantly increase their production capacity, the market competition will be more intense in the future. They can only absorb their own production capacity by crowding out the market share of other enterprises, and the merger and reorganization of the industry will intensify

Sany Heavy Industry itself has realized the decline of market growth rate. Sany Heavy Industry predicts that the domestic demand for construction machinery will increase by 18% in 2011 and 17% in 2012

cash flow tightening

large-scale expansion will inevitably pose great pressure on the future market. In fact, in order to seize market share, the two companies, together with other construction machinery enterprises, have increased credit sales, which has had a certain impact on the company's capital chain

XCMG machinery said that in terms of installment sales, the company generally allows customers to make a down payment of 20% to 30% and settle the remaining amount through installments over a period of up to 48 months. In 2008, 2009, 2010 and the first half of 2011, the contribution of credit payment sales and installment sales accounted for 33.2%, 47.6%, 47.6% and 56.4% of XCMG's total revenue respectively

this led to an increase in the balance and turnover date of the company's trade accounts and notes receivable. As of 2008, 2009, 2010 and the first half of 2011, the company's trade accounts receivable and notes receivable aged one year or more from the date of invoicing were about 118 million yuan, 210 million yuan, 457 million yuan and 788 million yuan respectively

XCMG machinery said that since 2010, the recognized impairment losses of trade receivables and notes receivable have increased significantly. As of the first half of 2008, 2009, 2010 and 2011, impairment provisions accounted for 11.6%, 8.6%, 6.4% and 4.0% of the company's trade revenue before the impairment of accounts and notes receivable, respectively

The same is true of Sany Heavy Industry. As of March 31, 2008, 2009, 2010 and 2011, Sany endorsement bills receivable were 847 million yuan, 886 million yuan, 1.731 billion yuan and 2.872 billion yuan respectively. On March 31, 2008, 2009, 2010 and 2011, the outstanding guarantees for Sany Heavy Industry to repurchase outstanding lease receivables were 790 million yuan, 2.119 billion yuan, 3.642 billion yuan and 3.905 billion yuan respectively

however, both companies believe that the increased risk of accounts receivable can be controlled based on the management of accounts receivable and bad debt rate in the past few years

the most important thing is to have confidence in the future market. Sany Heavy Industry quoted yengst associates' data to show that in 2010, the global sales of construction machinery exceeded 142billion US dollars, and it is expected that the global sales of construction machinery will continue to rise in the next five years

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