Decline in profit slows for industrial companies

PUBLISHED : Monday, 01 June, 2009, 12:00am
UPDATED : Monday, 01 June, 2009, 12:00am

Profits of mainland industrial companies saw signs of improvement in April despite continued decline in overall earnings, data from the National Bureau of Statistics showed yesterday.

Industrial profits in the first four months in 22 provinces fell 27.9 per cent to 487.3 billion yuan (HK$552.99 billion) from a year earlier, improving from the 32.2 per cent drop in the first quarter and pointing to a recovery in April, the statistics bureau said.

During the period, 23 out of 39 sectors reported faster profit growth or saw their losses narrowed, it said.

Among them, the power sector caught the eye as it returned to the black. It posted profit of 2.19 billion yuan at the end of April, in sharp contrast to a 1.37 billion loss in the first quarter. In other words, in April alone, the sector posted profit of 3.56 billion yuan.

The turnaround was due to lower coal costs and the electricity tariff rises in the second half of last year, analysts said.

China Datang Corp, the mainland's second-biggest power producer, last month also said it posted its first profit in 14 months in April on falling coal costs but has warned the operating environment remained tough.

The bureau said other sectors, including non-ferrous metals refining and processing, oil refining and coking coal, also reported earnings improved from the three-month level, while steelmaking, chemical and transport equipment manufacturing saw their profits drop narrowly.

The figures coincided with the Ministry of Finance's earlier numbers, which showed profits at state-owned enterprises slumped 32.3 per cent in the first four months but had narrowed 4.5 percentage points from the first three months. Earnings also grew 0.5 per cent in April from March.

Merrill Lynch economists Tung Lu and Timothy Bond said in a report that the mainland economy was 'well on track for recovery from April to May' as the fiscal stimulus was gaining traction and exports stabilised.

However, Yuan Gangming, an economist at the Chinese Academy of Social Sciences, said it was hard to say the worst was over and earnings at industrial companies would further improve in the coming months.

The bureau's figures cover only industrial companies above a certain size, so they exclude many of the smaller firms that have been hit the hardest by the economic slowdown.

The 22 provinces represent 78.6 per cent of industrial profits on the mainland.

'There are still many problems in the government's infrastructure-heavy fiscal stimulus measures. For example, small and medium-sized enterprises still find it difficult to get financing,' said Mr Yuan, who is on a business trip in Xinjiang.

He said many companies in Xinjiang faced cash-flow problems.

Hopeful signs

Industrial profits in the first four months of the year in 22 provinces fell: 27.9%