It is reported that 20 out of the 32 listed steel companies in China have published profit forecasts for 2008, among which 19 companies reported estimated profits drops of over 50% and only 1 said its profit would increase.
Industry analysts said the weak performance mainly resulted from collapsing steel price, lagged cost decline for raw materials and assets impairment, shrinking downstream demand as well as natural disasters such as snowstorms and earthquake. Profits in the first half of 2008 once hit record highs yet began to plunge in the second half, leading to losses in annual profits reported by five listed companies.
Five companies including Panzhihua New Steel & Vanadium Company Limited and SGIS Songshan Co, Ltd many eye losses for the first time. Fushun Special Steel Co Ltd is the only one who expects a 50% growth due to product mix adjustment. Anyang Iron & Steel Inc, Chengde Xinxin Vanadium and Titanium Co Ltd, Laiwu Steel Corporation, Nanjing Iron & Steel Co Ltd and Xinjiang Bayi Iron & Steel Co Ltd all foreseen net profit drop of over 50%. Besides various profits decrease forecasts, Fushun Special Steel Co., Ltd announced its net profit in 2008 would increase more than 50% from a year ago.
Panzhihua New Steel & Vanadium Company Limited forecasted a loss of CNY 430 million in last year, compared with a net profit of CNY 950 million in 2007. The company explained that the snowstorm in the year beginning interrupted the shipments of raw materials and finished products, hence it had to overhaul 1# blast furnace ahead of schedule. Besides, profits fell significantly under the influences of Wenchuan earthquake and global financial crisis. It initiated inventory falling price reserves for steel products and raw materials in the year end.
For the same reasons, Pan Gang Group Sichuan Changcheng Special Steel Company Limited expected an annual loss of CNY 350 million.
Xining Special Steel Co Ltd. reported an estimated loss in 2008 while SGIS Songshan Co Ltd said it would incur a loss of CNY 1.35 billion. Guangzhou Iron and Steel Co Ltd. also forecasted a loss compared with net profit of CNY 37.7529 million in 2007. Some other companies, such as Angang Steel Company Limited and Shanxi Taigang Stainless Steel Co Ltd witnessed sliding profits.
Angang Steel Company Limited forecasted a net profit of approximately CNY 3.42 billion in 2008 down by 55%YoY. The company earned CNY 2.44 billion in Q1, CNY 3.54 billion in Q2, CNY 2.27 billion in Q3 yet lost CNY 4.83 billion in Q4. 2.
Taigang Stainless Steel Co Ltd expected a net profit of CNY 1.2 billion in 2008, falling 72% from the CNY 4.248 billion in a year earlier. Sluggish stainless steel market, weak exports impacted by overseas economic recession and exchange rate, high-price raw materials stored in previous period all resulted in a lower profit.
Liuzhou Iron and Steel Co Ltd forecasted a profit fall of some 98% whereas Nanchang Changli Iron & Steel Co Ltd expected a drop of over 90%. Sansteel Minguang Co Ltd and Gansu Jiu Steel Group Hongxing Iron and Steel Co Ltd. estimated the profits would plummet 70% to100% and more than 90% respectively.
Lingyuan Iron & Steel Co Ltd, which has shifted primary business to iron ore, said net profit in 2008 would amount to less than half of that in 2007.
(Source: China Securities Journal)
