Luoyang Glass reports net loss
H-share company Luoyang Glass, which has seen its shares nearly double in the past two weeks, yesterday announced a net loss of 45.11 million yuan (about HK$41.9 million) for the six months to June 30, blaming falling product prices and excess supply.
It is one of 10 mainland state-owned enterprises listed in Hong Kong, also known as H shares, to release interim results in advertisements today.
Although Luoyang Glass was an exception in reporting a net loss, many other H shares said results had been squeezed by adverse market conditions with some such as Kunming Machine and Shandong Xinhua Pharmaceutical posting sharp falls in net profits.
The likelihood of such disappointing performances has been ignored by investors who have pushed up the Hang Seng China Enterprises Index or H-share index by 59 per cent since the beginning of the year.
Investors have been betting that future restructuring in the H-share sector would boost its profitability.
Luoyang Glass, for one, said that as Beijing would hasten the pace of state-owned enterprise reform, it, being one of the largest glass manufacturers, could exert a positive influence during the process for restructuring in the glass industry.
It also warned the operational environment for the company was not likely to change substantially in the second half due to an over-supply of glass.
Net loss for the first six months was compared to a gain of 18.92 million yuan in the same period the previous year. Sales dropped slightly to 298.93 million yuan. Losses per share were 0.064 yuan, compared to a gain of 0.027 yuan. The company apologised to shareholders for the loss, claiming it had been hit by weak demand, over-supply and a rise in prices of raw materials and energy.
'Since the first-half year was the slack season for float sheet glass [its main product], sales and marketing work was hard,' it said.
To maintain its market domination, it has slashed its prices by an average of 17.16 per cent.
Due to a large-scale renovation on one of its production lines, the production of its float-sheet glass also fell during the period.
