Angang earnings soar to 7.1b yuan
Angang Steel, the largest Hong Kong-listed mainland steel producer, beat its own profit forecast as earnings rose sharply last year, thanks to higher product prices and its acquisition of its parent firm's assets.
Net profit rose to 7.09 billion yuan by international accounting standards, up 236.2 per cent from 2.11 billion yuan in 2005 and 8.6 per cent ahead of the 6.53 billion yuan mean estimate of 21 analysts polled by Thomson First Call.
The company forecast 6.12 billion yuan profit in a circular to shareholders in February last year that gave details of the acquisition of 19.69 billion yuan of steel production assets from its parent, Anshan Iron and Steel Group, the mainland's second-largest steelmaker.
Second-half net profit grew 347 per cent to 3.98 billion yuan, as a new cold-rolled steel sheet plant came into operation in June.
Turnover surged 106.1 per cent to 54.59 billion yuan last year, by mainland accounting standards, after Angang started booking contributions from the assets it acquired in January.
The acquisitions helped crude steel output jump 348.7 per cent to 15.16 million tonnes and steel products output rise 131.9 per cent to 14.02 million tonnes.
Overall operating margin rose to 17.5 per cent from 11.2 per cent in 2005, as the acquired assets commanded higher margins, and cost savings were made from streamlining operations after the acquisitions.
Gross margins improved in all product segments, with the margin on cold-rolled steel products, Angang's mainstay product before the asset injection, jumping to 27.7 per cent from 18.3 per cent in the previous year.
Angang has a 10.3 per cent share of the mainland's cold-rolled steel products market, as well as a 9.1 per cent market share in hot-rolled steel and 29 per cent in silicon steel.
It produced 2.38 million tonnes of cold-rolled and 5.44 million tonnes of hot-rolled sheets last year. Cold-rolled and hot-rolled sheets are made from crude steel. They are further processed into higher-value-added products such as colour-coated steel and galvanised iron products used in the vehicle and home appliance industries.
The company plans to spend 12 billion yuan this year on its 22.6 billion yuan, five million tonne-a-year steel project, which is scheduled to be completed next year.
Angang expects to benefit from Beijing's harmonisation of the corporate profit tax rates of domestic and overseas companies, as its tax rate will fall to 25 per cent from the start of next year, from 33 per cent this year.
The firm's total borrowings-to-equity ratio stood at 44.8 per cent last year, compared with almost zero a year earlier. Angang incurred 901 million yuan of finance charges last year, as it paid interest on 6.95 billion yuan of delayed payments to its parent for the acquisition.
Earnings per share amounted to 1.20 yuan last year, almost doubling from 70 fen in 2005.
Angang's share price rose 3.7 per cent to HK$15.10 yesterday before the results were announced.