Profit gains continue at mainland factories | South China Morning Post
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  • Mar 31, 2015
  • Updated: 4:39pm
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industry

Profit gains continue at mainland factories

Cheaper raw materials and infrastructure projects give bump to manufacturers

PUBLISHED : Friday, 28 December, 2012, 12:00am
UPDATED : Friday, 28 December, 2012, 4:14am

Profits continued to grow at mainland manufacturers last month on the back of lower raw material prices and following Beijing's approval of more infrastructure investment projects, a move aimed at spurring the economy by offsetting weaker export growth.

Earnings at companies with annual sales of at least 20 million yuan (HK$24.57 million) leaped 22.8 per cent to 638.5 billion yuan in November from a year earlier, the National Bureau of Statistics said yesterday.

It marks the third straight month of gains, and outpaced October's 20.5 per cent rise, and September's 7.7 per cent increase. September's gain was the first in six months, after profits were squeezed by weak overseas and domestic demand, as well as the high-cost inventory of raw materials that were procured earlier.

For the first 11 months of the year, industrial profits increased 3 per cent to 4.66 trillion yuan from the year-earlier period.

Analysts attributed the pickup in growth of industrial profits in recent months partly to the fact that growth in the previous corresponding months was held down by Beijing's efforts to stifle property speculation and contain inflation.

Sharp falls in commodities prices, which lowered raw material prices, also boosted profit in recent months.

"Manufacturers should be able to sustain profit improvement for a while, as re-stocking in the supply chain began only in October," AMTD Financial Planning general manager Kenny Tang Sing-hing said.

A pickup in industrial output also buoyed industrial profits in November, with output growing 10.1 per cent from 9.6 per cent in October compared with a year earlier.

Xinhua yesterday quoted Industry Minister Miao Wei as saying that mainland industrial output was on track to grow 10 per cent this year from last year, and Beijing was aiming for the same growth rate next year. In 2011, industrial output expanded 13.9 per cent from 2010.

November's higher industrial profits were also in line with a rise in the HSBC China manufacturing purchasing manager index to 50.9 in mid-December from 50.5 in the middle of last month. The index is a leading indicator of the manufacturing sector's operating conditions.

The index's gain was led by new orders, output prices and higher work backlogs.

Amicus Asset Management director Conita Hung Lai-ping also believes the improvement in industrial profits will continue in the next few months. But she added that the gains might gradually be led by sectors that previously warned of profit declines, such as steel, as their fortunes turn around with stronger demand. "Meanwhile, the cement sector has already seen demand growth outpace supply growth, which helped improve profits," she said.

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