Company Force Majeure

Shanghai Electric net profit dips to 2.5b yuan

PUBLISHED : Saturday, 25 April, 2009, 12:00am
UPDATED : Saturday, 25 April, 2009, 12:00am

Shanghai Electric Group, one of the nation's top three makers of power generation equipment, posted an annual net profit at the low end of the range it forecast in January.

At 2.53 billion yuan (HK$2.87 billion), the profit for last year based on international accounting standards was lower than the 2.81 billion yuan recorded in 2007 and the 2.57 billion yuan estimated by 16 analysts polled by Thomson Reuters.

The company said in January that net profit for last year would be 10 per cent to 13 per cent lower than the 2.9 billion yuan forecast it made in November, or 2.52 billion yuan to 2.61 billion yuan.

It said this was because some power equipment customers in December last year requested a delay in delivery to this year, 'in response to changes in the macroeconomic environment and government policies'.

According to a Morgan Stanley research report, the management said the government allowed the 17 per cent value-added tax charged on such equipment to be tax deductible from the start of this year.

The lower profit last year was mainly because of fast growth in management expenses, a sharp jump in asset write-down and lower investment gain, according to a detailed announcement on the Shanghai stock exchange based on mainland accounting standards.

Turnover climbed 5 per cent to 58.9 billion yuan because of higher sales of power equipment, electro-mechanical equipment, heavy machinery and environmental protection systems. This was partly offset by lower sales of transport equipment.

Gross profit margin edged up to 18.2 per cent from 17.7 per cent in 2007, but operating margin dropped to 6.7 per cent from 9.95 per cent.

The decline in net profit was much more moderate than that of operating profit, thanks to a 930 million yuan drop in tax expense.

The company also announced a 16.5 per cent decline in net profit to 610.21 million yuan for this year's first quarter, from 730.96 million yuan in the year-earlier period.