Manufacturing, steel industries worst affected as demand falls

More than half of listed companies on the Chinese mainland are forecast to see their annual profits decline because of lower economic activity in 2012, with manufacturing companies likely to suffer the most.

According to Wind Info, the financial information service provider, 965 listed companies have issued their forecast for full-year earnings in 2012, and of them, 452 expect their net profits to decline. A total of 187 listed companies expect their annual net profits to decrease by more than 50 percent, according to Wind Info.

A slump in external demand and slowing domestic economic growth has put great pressure on Chinese companies last year, especially those in the manufacturing sector.

China's official manufacturing Purchasing Managers' Index was 50.6 last month - the same as in November. HSBC Holdings Plc also released its manufacturing PMI figure of 51.5, the highest in 19 months.

Analysts said both showed signs of a continuous but modest economic recovery, although some companies have already lost out due to the long-term flat market.

Chinese steelmaker Guangdong Shao-steel Songshan Co forecast an estimated loss of 1.8 billion yuan ($285.7 million) for the year - a 58 percent slump year-on-year.

"The domestic steel market remained gloomy in 2012, with an oversupply of steel leading to a drop in prices. Although the price began to climb during the fourth quarter, fuel material prices also rose, making the loss worse," the company said in a notice.

Taiyuan Heavy Industry Co forecast an annual loss of 350 million yuan due to low demand and rising costs.

Manufacturing companies that produce electronic components, raw chemical materials and chemical products are suffering the greatest losses, according to the announcements firms have issued.

"The external market affected our business a lot in 2012," said Zhu Weiying, deputy general manager of Galaxy Semiconductor Co, a transistor and diode manufacturer.

She said annual revenue in 2012 was about 600 million yuan, almost the same as the previous year, which was "below expectation".

"The PMI figure in December showed that small and medium-sized enterprises have led the rebound in the manufacturing sector, not SOEs or big companies," Shanghai Securities' analysts Wang Weili and Ying Nanshu wrote in a report.

The manufacturing market has reached its bottom and begun to rebound. Since the rebound is realized mainly through the market force, rather than government-led investment, the recovery may be different from the past, the report said.

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(China Daily 01/09/2013 page15)