State firms post 32pc income dip, but upbeat signs emerge

PUBLISHED : Thursday, 21 May, 2009, 12:00am
UPDATED : Thursday, 21 May, 2009, 12:00am

Profits at state-owned enterprises slumped more than 30 per cent in the first four months of the year amid the global downturn, but there were signs of improvement last month, figures from the Ministry of Finance showed yesterday.

From January to April, state firms, excluding financial institutions, posted a profit of 323.64 billion yuan (HK$367.62 billion), a decline of 32.3 per cent from the same period last year, the ministry said. Turnover fell 7.3 per cent to 5.979 trillion yuan.

Despite the earnings slide, performance improved last month as the mainland economy felt the positive effect of the central government's 4 trillion yuan stimulus package.

Compared with the first three months of this year, the plunge in profits of state enterprises narrowed 4.5 percentage points, the ministry said. Company earnings grew 0.5 per cent last month from March, it added.

State-owned Assets Supervision and Administration Commission chairman Li Rongrong said last month that state firms were weathering 'a deep winter', especially those in the banking, telecommunications and oil sectors, thanks to the economic stimulus measures.

Payable taxes at state firms also showed a similar trend. According to the ministry, the companies owed 554 billion yuan in taxes in the first four months, a drop of 4.4 per cent from a year earlier. But for April alone, payable taxes were 2.3 per cent higher than in March.

The ministry said, without giving figures, earnings for the cigarette and construction sectors grew during the period, while earnings for the coal, construction materials and trading industries were 'stable'.

It also said the earnings decline in the oil and petrochemicals, machinery and vehicle industries 'narrowed', while the steel and shipping sectors still posted losses.

'The profitability of mainland companies is expected to further improve in the coming months as Beijing's 4 trillion yuan stimulus package takes effect,' said Kenny Tang Sing-hing, head of research of Redford Securities.

'Figures for the mainland's purchasing managers' index were improving. Prices for raw materials, such as iron ore and non-ferrous materials, have gained 30 per cent from their lows last year.'

JP Morgan Chase also said in a report that the earnings momentum of H shares - mostly state-owned companies - saw a sequential improvement in the first quarter.

Although the reported profit for H shares fell 19 per cent year on year in the quarter, the decline moderated from the fourth quarter's plunge of 75 per cent.

The first-quarter earnings for H shares surged more than 300 per cent from the fourth quarter last year, according to JP Morgan's calculation.

The overall profit margin of H shares also expanded notably, rising to 12 per cent in the first quarter from 3 per cent in the previous quarter, the United States bank said.

The consensus on the country's gross domestic product growth has been recently raised, and the upward earnings revision trend could continue, JP Morgan said.