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XCMG plans share placement to raise additional capital

By Liu Yiyu (China Daily)
Updated: 2009-12-30 08:05

XCMG Construction Machinery Co Ltd, the nation's largest construction machinery maker, will raise 5 billion yuan through a private placement of shares to finance new projects and obtain advanced technology, according to a statement the company filed to the Shenzhen Stock Exchange yesterday.

The company said it will issue 50 million to 165 million shares in the private placement to 10 unamed investors.

Funds raised will be used to develop nine projects, including the areas of research and development, as well as main engine, component and information systems.

The Shenzhen-listed company said the nine projects will add nearly 2.3 billion yuan in profit each year after completion.

The Jiangsu-based manufacturer recorded 14.2 billion yuan in revenue in the first quarter of this year, while profit hit 1.3 billion yuan.

The company expects its profit to be 1.58 billion yuan this year, 13 times that of last year as a result of China's stimulus policy that spurred investment in the property and infrastructure sectors.

Construction machinery is widely used in housing, highway and railway construction, as well as mining projects, all of which were beneficiaries of the central government's 4-trillion-yuan stimulus package.

The share price of the Shenzhen-listed company more than doubled to 34.87 yuan from a year earlier.

XCMG's move raised concerns as the company's debt ratio remained remarkably high. The debt ratio hit 75.64 percent, almost 20 percent higher than its competitors.

The company said earlier this year they planned to complete an overseas listing within three years and the fund-raising was considered one way to increase its assets.

China's machinery makers are capitalizing on the opportunity to raise capital in order to become bigger and stronger.

XCMG is one of a growing number of Chinese machinery makers increasingly competing with global heavyweights such as Caterpillar.

Its overseas revenues come mainly from the Middle East, Central Asia and Eastern Europe, but South American markets such as Argentina and Brazil are emerging.

Hunan-based Changsha Zoomlion Heavy Industry Science and Technology Development Co, another construction equipment maker, also completed additional share issuance amounting to 5.5 billion yuan in April.

Sany Industry Co, China's second largest engineering machinery producer, completed an acquisition from its parent company through a private share placement.