Prosperity Minerals Holdings (AIM: PMHL), which has just sold its Chinese cement business for £300 million, reported higher H1 revenues and profits amid what the company said was a challenging economic environment, now looking to take advantage of the massive cash inflow to develop other businesses in China.

Revenues for the six months to 30 September surged 33% to US$491.4 million as gross profits climbed 22% to US$30.2 million. However, pretax profit declined 91% to US$1.3 million and EBITDA (earnings before interest, tax, depreciation and amortisation) were down 35% at US$18.8 million.

The group continued to be negatively affected by the economic downturn, which propelled an overall decline in cement, steel and iron ore prices. However, both the cement and iron ore trading businesses still performed well, largely due to high levels of demand from China, which began to experience the full effect of the government’s US$586 billion stimulus package.

The highlight of the year was this month’s sale of its Chinese cement business Upper Value Investments Limited for HK3,800 million, or £300 million, to TCC International Holdings (HGK: 1136), allowing it to dispose of a high maintenance asset and focus on its iron ore business. The transaction is expected to realize a return on equity of 91%, bringing in cash reserves to fund the development of other businesses such as the group’s existing iron ore related operations, natural resources and real estate in China.

The group is expecting to derive further benefits from China’s stimulus programme, also noting that iron ore operations are picking up as spot prices for iron ore and ocean freight rates have increased over the past two months, which is expected to reduce the reliance of steel mills on imports.

Prosperity said that the construction of all three of its Greenfield projects was on schedule and inside budget with most of the financing for construction working capital has either been arranged or is being arranged. The first new clinker production line of 1.8Mtpa at the Greenfield project in Liaoning Province is expected to be commissioned before the end of the current fiscal year, while the construction of the first cement and clinker production lines of 2Mtpa is also under way at the Greenfield Projects in Chongqing Direct Municipal City and Guizhou Province.

The group’s share price roughly doubled over the past six months, climbing from below 60 pence in July to the current level of 111 pence per share.