Mainland factories see less profits for 4th month

The mainland's industrial sector last month recorded its fourth year-on-year profit decline in five months, underlining the impact of the economic slowdown on manufacturers.

Total manufacturing profits dropped 5.3 per cent in May from the year-earlier period to 390.9 billion yuan (HK$479.9 billion), after a 2.2 per cent fall in April, a 4.5 per cent growth in March, and a 5.2 per cent decrease in January and February combined, data from the National Bureau of Statistics showed.

For the year's first five months, industrial profit dropped 2.4 per cent year on year to 1.84 trillion yuan.

Still, of 41 industries tracked by the bureau, 26 saw profit growths, 13 experienced declines, one changed from profit to loss; and another from a loss to a profit. Among the gainers, profit rose 4 per cent in the oil and gas production sector, compared with 16.7 per cent for the agricultural and food processing sector, and 22.2 per cent for electricity and heat generators.

Oil and gas producers were supported by a higher international oil price to which domestic prices were linked. The average Brent oil price for the first five months rose 7.2 per cent year on year to US$115.5 a barrel, although domestic oil output fell 1.0 per cent due to a major offshore oil spill that led to a halt in production.

Power generators saw a marked improvement in their profits due to a power price increase in December of about 6 per cent, while coal costs, which typically account for 70 per cent of their operating costs, were largely steady year on year.

The losers included chemicals producers, which showed a 23 per cent profit decline, compared with a 56.9 per cent fall for steel smelting and processors, and a 16.5 per cent decrease for makers of computers and telecoms equipment.

Profit margins for chemical producers have been squeezed by high costs of feedstock - mainly crude oil and coal, while reduced demand from clients that engage in downstream manufacturing industries has resulted in weaker price rises.

Steel product makers have been suffering from prolonged losses due to high material costs, industry oversupply and weakened demand after Beijing tightened lending and slowed approval of infrastructure and construction projects last year.

Oil refining, coal-coking and nuclear fuel processing have all turned profits into losses.

10.4%

The percentage increase in profit for mainland carmakers