Baotou Steel plans to issue 2b yuan bonds

Funds to trim finance costs after annual profit dives 35pc

Inner Mongolian Baotou Steel Union, which reported a 35 per cent plunge in full-year profit, plans to issue two billion yuan in short-term bonds to lower financing costs and fund expansion.

The one-year-maturity bonds will be used to repay part of its bank borrowings, the Shanghai-listed arm of the mainland's 12th-largest steel mill said in a statement to the stock exchange.

Net profit declined to 653.8 million yuan last year from one billion yuan a year earlier due to falling turnover and higher raw material costs.

Net financing costs also rose 184.5 million yuan from a year earlier as total debt fell 3.65 per cent and interest income from bank savings declined, the company said.

Turnover fell 3.7 per cent to 18.27 billion yuan from 18.97 billion yuan.

The rising cost of iron ore and coking coal helped to erode gross profit margin to 7.02 per cent last year from 7.07 per cent in 2005, the steelmaker said.