Mixed bag as SOE profits grow 3.3pc
Combined profits for state enterprises grow 3.3pc for quarter, but losses in hard-hit sectors underscore challenges in economic slowdown
The mainland's state-owned enterprises (SOEs) recorded faster profit growth last month, although continued losses acted as a drag in the transport, steel and non-ferrous metals sectors.
Total profit of the nation's SOEs hit a combined 533.7 billion yuan (HK$670.2 billion) in the first-quarter of the year, up 3.3 per cent year on year, the Ministry of Finance said in a statement. The growth picked up from 2.8 per cent in the first two month of the year, implying growth in March alone was substantially above 3.3 per cent.
Still, the first-quarter profit growth remained weak relative to 5.9 per cent for the whole of last year, and was a far cry from the 37.9 per cent recorded in 2011.
It was even weaker than the 9.8 per cent recorded in 2009 at the height of the global financial crisis.
This reflects the slowdown of the entire economy, which expanded 7.4 per cent in the first quarter, the slowest since 2012.
Property investment growth slumped to 14.2 per cent last month from 19.3 per cent in the first two months of the year given the tight credit environment, according to Barclays.
Real estate accounted for 22.5 per cent of the mainland's fixed-asset investment in the first-quarter. SOEs, which dominate the energy, utilities, resources and construction sectors, are more exposed to fixed-asset investment than private firms that tend to be more exposed to light industries and export sectors.
According to the ministry, local government-administered SOEs saw first-quarter profit fall 3.8 per cent to 101.6 billion yuan, a sharp contrast to a 5.1 per cent profit growth to 432.2 billion yuan for central government-administered SOEs. Central government SOEs tend to be larger and have better access to bank loans and the debt market. The ministry's statement also revealed that SOEs in general endured a 19.3 per cent year on year rise in finance costs amid tighter credit availability, compared with sales and distribution expense growth of 9.6 per cent and corporate administration cost growth of just 0.5 per cent.
Sectors that reported the highest first-quarter profit growth include construction materials, property construction, automobile, electronics and electricity, while the chemicals, coal and textile sectors posted the biggest profit declines. Transportation, steel and non-ferrous metals sectors saw continued losses.
But a Daiwa Securities research report said leaders in the steel and cement industries have seen profit improvements last year due to higher sales volume, lower steel-smelting raw material prices and higher cement prices.
"Reflecting our forecasts for higher sales volume and profit margin expansion, we expect the earnings growth seen for the major cement and steel producers last year to continue over this year and next year," it said.