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SGMG steels itself for Fujian Sanan
Posted on Monday, 13 November 2017 11:39
Significant competition and excess capacity within China’s steel industry has prompted Fujian Sansteel Minguang (SGMG) to acquire Fujian Sanan Steel in a deal worth CNY 2.76 billion (USD 415.85 million).
A downturn has only increased pressure on the country’s relatively mature sector, which is characterised by a fragmented layout where each province, autonomous region and municipality have their own players.
The government is attempting to tackle the issues at hand by pushing for mergers and reorganisations of large, listed entities, implementing strategic restructuring and promoting the development of small and medium-sized enterprises.
China accounts for roughly half of the world’s steel output and has been attempting to use consolidation to weed out the smaller and less competitive mills.
However, it wants to retain its edge in the market and the recent merger of two of its biggest entities has created the second-largest manufacturer by tonnage after ArcelorMittel.
SGMG’s acquisition of smelter, processor and roller Sanan is in line with this strategy to slash capacity and curb pollution, which has helped to push prices up.
The listed group is a long-running steel producer in Fujian that uses coking, sintering, blast furnace, converter, continuous casting and tandem rolling to make items that include deformed bars and wires for reinforced concrete.
It owns the province’s largest coke oven, sintering machine, blast furnace, converter and the only slab continuous casting production line, technology and equipment, according to its website.
The downturn has impacted SGMG’s top line as revenue fell for two consecutive years before rising to CNY 14.12 billion in the 12 months ended 31st December 2016.
After recording a net loss of CNY 929.00 million in FY 2015, it booked a profit of CNY 927.00 million in FY 2016.
SGMG’s acquisition is one of the largest announced so far in 2017 of a Chinese company operating in the primary metal manufacturing and forging and stamping sectors, according to Zephyr, the M&A database published by Bureau van Dijk.
© Zephus Ltd