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CNBM sale to trim record debt

CHINA National Building Material Co, the country's second-biggest cement maker, may sell assets to reduce a record amount of debt, said President Cao Jianglin yesterday.

CNBM ''is investigating'' selling equipment and leasing it back to bolster cash flow, Cao said in an interview with Bloomberg News. The Beijing-based firm is also betting on government orders as China plans to spend 4 trillion yuan (US$585 billion) in two years to boost the economy.

''In good economic conditions, the gearing ratio will naturally decrease when operating cash comes in,'' said Sinopac Asia Securities Ltd analyst Jay Zhou in Shanghai. ''Now that cash flow isn't adequate and the high ratio has persisted, investors are nervous.''

With China's economy growing at the slowest pace in seven years, more companies are facing tighter lending as credit markets and orders dry up. CNBM plunged 69 percent last year, more than the 48 percent decline in Hong Kong's Hang Seng Index, as investors fretted that slowing sales growth would fail to justify owning twice as much debt as equity.

CNBM rose 3.8 percent, the third-biggest gain in the Hang Seng China Enterprises Index, to end at HK$9.08 (US$1.17) yesterday. That's the highest close since January 6.

The company last week sold HK$2.14 billion of shares to help pay down debt and increase equity to reduce its debt-to-equity ratio to less than 160 percent this year from 216 percent as of June 2008.

''We should be able to reach the debt-ratio target ahead of schedule and have it even lower by the end of the year,'' Cao said by phone on Friday. There are no plans to cut jobs or management salaries because of the economic slowdown, he said.

The China Cement Association reported on Monday that profit among the nation's cement producers rose an average 30 percent last year, slowing from a 60 percent gain in 2007.

Investors may have found CNBM's debt ratio in the first half of last year ''a bit high,'' Board Secretary Chang Zhangli said in the same interview.

CNBM's debt level compares with 125 percent for Paris-based Lafarge SA, the world's largest cement producer, and 19 percent for Anhui Conch Cement Co, China's biggest, according to data compiled by Bloomberg.

CNBM, which has a market value of HK$19.6 billion, is set to announce 2008 earnings in April.


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