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CITIC Limited Annual Report 2014
Manufacturing

Heavy Machinery Manufacturing

CITIC Heavy Industries is one of the world’s leading manufacturers of heavy mining equipment and cement equipment. It is also one of the largest heavy machinery manufacturers in China.

CITIC Heavy Industries engages in the design and development of large sets of technical equipment, large castings and forgings, as well as the provision of related services to customers in the mining, construction materials, coal, metallurgical, non-ferrous, power electronics and environmental protection industries. The company’s main facilities are located in Luoyang City in Henan Province and Lianyungang in Jiangsu province. It also has a production facility in Vigo, Spain.

Year in review

In 2014, faced with a challenging operating environment including a slowing economy in China, CITIC Heavy Industries’ businesses remained profitable. While most industry peers suffered losses, the company recorded a profit of RMB408 million for the year, a decrease of 17% from 2013.

CITIC Heavy Industries pressed ahead with the following three strategies in 2014:

  • The continued development of the company into a technologically advanced manufacturer through the research and development of new products, particularly in the areas of energy-saving and environmental protection. In line with this approach, CITIC Heavy Industries achieved a new product rate of 75%
  • Transformation from a manufacturer of single components into a total engineering solution provider, starting from design through to civil construction, manufacturing and installation supported by after-sales service.This strategy saw an increase in new sales contracts related to packaged equipment totalling RMB5.7 billion in 2014, representing 56% of all orders.
  • Further development of markets outside China. During the year, overseas sales revenue increased by 21% to RMB1.8 billion, representing 34% of total sales revenue.

The construction, mining and coal sectors continued to be the main profit contributor in 2014, representing 37%, 33% and 11% of total revenue respectively. However, the company is increasingly focused on diversifying its source of revenue into areas such as energy, the environment and power electronics.

Manufacturing capability

CITIC Heavy Industries is one of the few Chinese companies with the ability to design and manufacture equipment in the cement and mining industries according to standards set in Europe and the United States.

CITIC Heavy Industries designed and built the world’s largest and most advanced 18,500 tonnes free forging hydraulic oil press machine. This enabled the company to meet manufacturing requirements for large and highend equipment in the nuclear, military, hydrogenation, ocean equipment industries.

Products

A key to CITIC Heavy Industries’ success is its strength in product research and development. The company’s technical centre is the only one in China with a comprehensive R&D capability in mining equipment. In addition, the company has established an R&D centre in Australia, where it works closely with international customers to promote its products in markets across the Asia-Pacific region. Through the acquisition of Spanish Gandara Censa S.A, the company has also gained a foothold in Europe, providing a gateway to mineral-rich regions such as South America and Africa.

In 2014, CITIC Heavy Industries made breakthroughs in the development of variable-speed drive products. The CHIC1000 and CHIC2000 series have now successfully entered domestic and international markets. The CSM-1200 vertical grinding mill designed and manufactured for Codelco, the National Copper Corporation of Chile, was well received.Another new product, a semi-mobile crushing station for use in extreme cold weather environments such as the Arctic, was also delivered during the period for LKAB of Sweden. At the end of 2014, CITIC Heavy Industries owned 19 registered trademarks and 380 patents in China.

Customers

CITIC Heavy Industries’ customers include Lafarge, Holcim, BHP Billiton, VALE, China Shenhua Energy, China Huaneng Group, China National Gold Group Corporation and Anhui Conch Cement Company. The company’s top ten customers in 2014 accounted for 33% of total revenue. High-end customers with sizable and sustainable mining, construction, coal and metallurgy non-ferrous industries are an important source of business.

The slowdown in fixed investments will continue to be a challenge. CITIC Heavy Industries will maintain its focus on sales and R&D in energy saving, environmental protection and low-speed, high-power frequency converters for heavy duty applications and automation, which it believes to have good growth potential. The company has seen encouraging results in these areas, with energy saving and environmental protection projects accounting for 43% of total revenue in 2014.

Over the past two years, CITIC Heavy Industries has developed an efficient procurement and supply management system, good quality control and excellent capabilities in technology and R&D. In the year ahead, the company will look to extend these competitive advantages.