On November 12, Changling hydarualics announced that Jiangsu Changling Precision Manufacturing Co., Ltd. ("Changling Precision"), a wholly-owned subsidiary of the Changling hydraulic, has acquired Jiangyin Lianhua Casting Co., Ltd. ("Lianhua Casting") ,Jiangyin Yuandong Heavy Industry Co., Ltd. ("Yuandong Heavy Industry") and Jiangyin Huatai Machinery Manufacturing Co., Ltd. ("Huatai Machinery") through online auction system at price of RMB 275 million.
The construction machinery industry is an important application field of the company's hydraulic components. The complex working conditions of construction machinery requires high quality level. Therefore, the quality of castings as an important material of hydraulic components is very critical.
With the acquisition of assets and the implementation of casting technology innovation project, Changling Hydraulic will strengthen the production capacity of hydraulic castings for construction machinery, improve the raw material’s self-sufficiency and quality control ability, reduce the impact of price, quality and delivery caused by purchasing raw materials, and strengthen the company's advantages on quality and cost.
Extend the self-supply casting to further strengthen cost control
The cost of raw materials is the mainly portion of the all cost in the company. And the raw materials are mainly steel. So, the fluctuation of steel price has a certain impact on the company’s costs, especially when the price of raw materials has an unexpectedly rapid upward trend. If the company fails to adjust product prices in time, it will have a certain adverse effect on company performance.
The cost of raw materials is the mainly portion of the all cost in the company. And the raw materials are mainly steel. So, the fluctuation of steel price has a certain impact on the company’s costs, especially when the price of raw materials has an unexpectedly rapid upward trend. If the company fails to adjust product prices in time, it will have a certain adverse effect on company performance.
This acquisition will further extend the industrial chain of company from castings to finished product, expands the company’s business scale, consolidates company’s competitive advantage, and provides sufficient supply of raw materials for the company’s R&D project to meet the needs of the new products, support the R&D and innovation of hydraulic component and ensure the company’s continuous development.
Improve the productivity of the company's casting products with high-quality casting project
Further introduce the company acquired: Lianhua Casting mainly produces and processes precision castings for automobiles, agricultural machinery, water pumps, compressors, and household appliances; Huatai Machinery manufactures and sales the boilers and boiler’s components;Yuandong Heavy Industries’ main products include automobiles Parts, compressor parts, railway parts, construction machinery, .etc.
Yuandong Heavy Industries as a modern foundry factory, it has a DISA moulding machine made in Denmark and a Rolla Mendis sand moulding machine made in Spain, a double-rotor sand mixer, an American Yingda electric furnace, CNC lathes and machining centers and so on. It also has stationary metal analyzer made in German, OLYMPUS optical microscope, CMM and other professional and precision testing equipment. The existing two casting production lines have a capacity of 30,000 tons/year.
Based on the high-quality assets of the acquirement company mentioned. the technical innovation for some existing casting equipment has been carried out to ensure not only the production of existing products ,but also the production of the casting products of construction machinery, so as to meet the demands of castings of the hydraulic products for company's construction machinery.
The hydraulic components and precision casting have a good future and have good relationships with well-know customers
According to the data from development plan for the construction machinery sector during the 14th Five-Year Plan period, the average annual revenue growth at construction machinery industry is expected to be 3% - 5% during the 14th Five-Year period, and the industry's revenue will reach 900 billion RMB in 2025, which means that the market demand for hydraulic components and hydraulic precision castings will be increased.
After years of accumulation of production and operating experience, the company has formed advantages in the production, technology and operation in the hydraulic component industry. The company’s main products, central turning joints and track adjuster, have a relatively high market shares and are in the leading position in the industry. At the same time, the company’s long-term plan mainly focuses on the existing product and continuously expands the new products in the hydraulic industry. At present, the company has developed slewing devices for aerial work platform. Some products have been supplied in small batches. These products will be alternatives to imported product.
Central turning joints and track adjuster are key components of heavy Machinery. Products must be stability and reliability. Good reputation is an important factor for customer to choose the company's products. At present, Company has established long-term and stable cooperative relations with Sany heavy industry, XCMG, Liugong,SDLG, Volvo, Doosan Machinery, and Sumitomo Construction Machinery, etc.