Angang Steel expecting 55 percent drop

By Fu Chenghao | January 21, 2009, Wednesday |

Print Edition

ANGANG Steel Co yesterday said last year's net profit is expected to fall 55 percent, blaming high raw material costs and falling steel prices.

Angang is the first of the major Chinese mills, battered by slowing demand from auto makers and ship builders, to give a quantified earnings decline for last year. Net income was about 3.42 billion yuan (US$500 million) last year, compared to 7.53 billion yuan a year earlier, Liaoning Province-based Angang said in an unaudited earning forecast to the Shenzhen Stock Exchange late yesterday.

"This is in line with our estimates as falling steel prices and spot iron ore prices since June have affected earnings," said Daiwa Securities analyst Helen Lau, who forecast a 3.39-billion-yuan net profit for Angang.

Angang said it had set aside provisions of 1.8 billion yuan for losses on inventories. The mill relies on imports for about 20 percent of its iron ore needs, and the ratio is rising, a company spokesman said. The plunge in spot ore prices means Angang has had to shoulder more as its imports are based on annual contracts.

Angang also attributed the profit drop to its Bayuquan project, newly launched in September.

"It's difficult for Bayuquan to make money in the short term given the project's low operating ratio," Lau said.

Angang rose 2.26 percent to 8.15 yuan in Shenzhen trading yesterday.

Energy

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Angang Steel expecting 55 percent drop

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