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Falling demand forces Fuyao to stop 2 lines
CHINA'S Fuyao Group Glass Industries Co yesterday said it will stop two production lines because of weaker demand from the construction market.
Spurred by the booming property sector, domestic construction glass capacity had expanded rapidly over the past years. But the faltering economy has now forced many big glass companies to limit output since September. However, the market is still over supplied.
"As the impact of the United States subprime crisis on the global financial markets and the real economy deepened, the demand for glass for construction is expected to keep falling, with the gap between supply and demand widening," Fuyao said in a Shanghai Stock Exchange filing.
The two lines, in Fujian Province's Fuqing and Jilin Province's Shuangliao, have a combined daily glass melting capacity of 1,060 tons, the company said, without saying how long the suspension would last.
Fuyao, China's top auto glass maker, said it will set aside 250 million yuan (US$37 million) to 300 million yuan as provision for asset depreciation, which analysts said would hurt its balance sheet severely.
The provision may lead to a fourth-quarter loss, said Xu Minfeng, an analyst at Changjiang Securities.
The closure won't have a big impact on Fuyao's earnings in the next two years, Xu said.
"Given the global economic downturn, the key challenge Fuyao faces is falling demand from the auto sector, which contributes to the bulk of the firm's profits," Xu said.
Spurred by the booming property sector, domestic construction glass capacity had expanded rapidly over the past years. But the faltering economy has now forced many big glass companies to limit output since September. However, the market is still over supplied.
"As the impact of the United States subprime crisis on the global financial markets and the real economy deepened, the demand for glass for construction is expected to keep falling, with the gap between supply and demand widening," Fuyao said in a Shanghai Stock Exchange filing.
The two lines, in Fujian Province's Fuqing and Jilin Province's Shuangliao, have a combined daily glass melting capacity of 1,060 tons, the company said, without saying how long the suspension would last.
Fuyao, China's top auto glass maker, said it will set aside 250 million yuan (US$37 million) to 300 million yuan as provision for asset depreciation, which analysts said would hurt its balance sheet severely.
The provision may lead to a fourth-quarter loss, said Xu Minfeng, an analyst at Changjiang Securities.
The closure won't have a big impact on Fuyao's earnings in the next two years, Xu said.
"Given the global economic downturn, the key challenge Fuyao faces is falling demand from the auto sector, which contributes to the bulk of the firm's profits," Xu said.
