China National Building Material (CNBM) may not go ahead with its previously planned sale of 300 million new shares, as President Thomas Cao said Friday the mainland's second-largest cement maker has enough capital for its aggressive expansion plans.

The firm plans to raise its output to 186 million tons by the end of next year.

But sluggish market conditions and a slipping price of CNBM's shares were also reasons the firm decided to shelve the share placement, analysts said.

Cao said CNBM has secured 19.7 billion yuan worth of bank loans and is holding 3.15 billion yuan in cash, which includes remaining proceeds from its HK$2.7 billion-yuan share placement last August.

He believes all that money is enough to fund the company's future acquisitions.

"Today our cash is more than enough," Cao told reporters in a press conference. "We do not need more to fund our acquisitions. We may only go ahead with the share sale if the market conditions and our share price remains stable."

The share placement was announced by the company in February, but it hasn't been approved by shareholders. If the sale is approved at some point, the company will have one year to make the sale before having to get shareholder approval again.

Cao also said the company must return to the A-share market, but it does not have a timetable to do so.

The company's shares dropped 12.18 percent to close at HK$15 on Friday as investors were concerned about the rising production costs and the share-issue plan.

The surging coal prices have posted enormous pressure on the company's production costs.

An increase of 100 yuan per ton of coal will add 12 yuan to the company's costs, Cao said.

However, "the gross profits margin will increase this year as the rise in cement prices will outweigh the surge in production costs", Cao said.

CNBM's gross profits margin in 2007 increased from 31 percent to 33 percent.

Other core businesses of the company - which include lightweight building materials, glass fiber and Fiberglass Reinforced Plastics (FRP) products, and an engineering service segment - have maintained their stable gross profits margin.

The company will improve technology in order to reduce the consumption of energy and increase efficiency. It will also centralize the procurement of raw materials and consolidate financing of acquired companies to minimize costs.

Meanwhile, cement prices have increased 10 percent so far this year, Cao said, adding that the firm may raise prices twice by the end of this year.

CNBM's turnover in 2007 went up 63 percent to 10.51 billion yuan and its net profits went up 206 percent to 912.4 million yuan in 2007, driven mainly by the acquisition of extra capacity.

The firm's debt-to-equity ratio increased slightly from 105 percent to 110 percent.

(HK Edition 04/19/2008 page2)