According to the 3Q 2008 report issued by CSG Holding Co., Ltd. (000012), the company's revenue in 3Q 2008 was RMB 3,274,000,000, up 7.24% YOY, its net profit was RMB 545 mln, up 85.37% YOY, and the company expects a 50% to 100% YOY growth of net profits in 2008.

The revenue increase is mainly attributable to newly constructed glass projects, including the Dongguan solar glass and color filter projects that began operations this year.

Deceptively optimistic, worries linger behind these high figures. According to its 3Q 2008 report, revenue, gross margin and net profit figures indicate a downward turn of the glass industry during a time of doldrums for real estate enterprises.

Researchers from the building materials sector at Guotai Junan Securities believe that the company's cheerful numbers lack sustainability. Gross profit rates in the first three quarters are 32.5%, 32.1% and 29.5%. The trend of falling gross profit rates, shared by the glass industry as a whole, is predicted to continue past the first half of next year.

Thus, a direct result of gross profit decreases will be a decline in corporate profit that will, in turn, negatively impact production. Data issued by the China Building Materials Association show that from Jan to Aug 2008, the annual national output of ordinary flat glass was 61,480,000 weight boxes, down 6.9 % YOY, float glass was 322 million weight boxes, up 10.7% YOY; the lowest growth rate since 2000.

The company has postponed the trial production operation of its high purity silicon materials and solar cell projects, both infused with large amounts of investments from concerned investors. Presently, the projects are in the equipment examination stages.

Yiwan Industry Development (Shenzhen) Co., Ltd and Xin Tongchan Industry Development (Shenzhen) Co., Ltd., both holders of restricted company shares, said that they will decrease their holdings in the company by over 62 mln at no less than RMB 8 per share, within six months upon expiration of the shares' lock-up period. However, the company's 3Q report has indicated that these two shareholders have not yet decreased their holdings between Jul and Sep 2008.


Source: National Business Daily

Date: 22 Oct 2008

CN01/CJ/JL/NK/JW