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Toh Han Shih

China Railway Group posted a 550.47 million yuan (HK$625.06 million)  loss for the third quarter, largely  because of Australian-dollar-denominated structured deposits, while China Railway Construction Corp reported lower than expected  earnings on foreign exchange losses.
Despite the quarterly loss, China Railway reported 1.33 billion yuan profit for the first nine months on sales of 153.92 billion yuan.
The company booked a loss of 1.62 billion yuan from structured deposits during the period.
'[The yuan's] appreciation may drag the  profitability of the firm's overseas projects,' Core Pacific-Yamaichi analyst Roslyn Ji said  before the results announcement.
China Railway is one of the world's largest construction contractors whose  foreign projects include a railroad in the Philippines  and mines in the Congo and  in Australia.
'China Railway has weak pricing power due to the  government's pricing control. Besides, its small customer base with big clients [large  mainland state-owned firms] also caps its bargaining power against suppliers, resulting in higher costs and lower margins,' wrote Ms Ji.
'As the Chinese government is shifting its focus to railways from highways, we believe China Railway will profit greatly from the booming railway construction.'
The  Ministry of Railways  announced recently that railway investment  on the mainland  in the five years to 2010 has been increased from 1.25 trillion yuan to 2 trillion yuan, several times higher than the previous  period.
Meanwhile, China Railway Construction posted a net profit of 860.64 million yuan and revenue of 53.09 billion yuan for the third quarter.
For the first nine months,  net profit was 2.38 billion.
The  company's net profit was affected by a 320 million yuan foreign exchange loss booked in the third quarter.
'The company strongly believes that with its strength and the support of state policies, investors' confidence will be boosted,' China Railway Construction said.
The value of new contracts signed by  the company as of September 30 totalled 216.09 billion yuan, representing 86.4 per cent of the planned new contract value for the full year and a year-on-year increase of 22.7 per cent, the group said  in an announcement.
Heavy load
CRCC's third-quarter profit slows on foreign exchange losses
China Railway Group's loss from structured deposits, in yuan: yuan 1.62b



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