Hunan Nonferrous warns of net loss
Hunan Nonferrous Metals, the mainland's largest producer of non-ferrous metals excluding aluminium, warned it would post a net loss for the first half as a result of lower product prices and high production and financial costs.
This comes on the heels of a warning from Angang Steel, one of the nation's largest steel producers, that it expects to post a net loss of 1.98 billion yuan (HK$2.43 billion) for the six months, due to a drop in steel product prices of over 12 per cent.
The mainland's economic slowdown, on the back of policies to contain property demand and prices, and weak growth of exports to developed nations that damped manufacturing activities, has led to lower prices of industrial metals, especially those already in oversupply.
Hunan Nonferrous, the mainland's largest maker of cemented carbides, zinc and antimony, and a major producer of lead, silver, indium, tantalum and niobium, said in a statement yesterday that it expected to report a loss for the first half. It reported a net profit of 170.9 million yuan in the same period last year.
It attributed the expected loss to an across-the-board fall in prices of major products, which resulted in impairment loss of its inventory in addition to crimping revenues.
Gross profit has fallen 'dramatically' as production costs remain high, it said. It had a gross profit margin of 11.7 per cent in last year's first half and 10.2 per cent for the full year.
Hunan Nonferrous also blamed higher interest costs for the loss. Beijing for most of last year was tightening credit by asking banks to set aside more cash reserves at the central bank instead of lending out, resulting in higher interest costs for corporate borrowers as they were given smaller discounts on loan rates. This, even as the official benchmark interest rate had been held steady since 2008. Hunan Nonferrous had net finance costs of 297.8 million yuan in last year's first half. Its first-half results are expected next month. Its shares closed up 0.4 per cent at HK$2.36.
Hunan Nonferrous booked a net profit of this much, in yuan, for the first half last year