Fri, Jan 27, 2017 - Page 10 News List

China industrial firms post best profit in three years

Reuters, BEIJING

Profits for China’s industrial firms last year rose the most in three years as a construction boom fueled a rally in prices of building materials from steel to cement, giving companies more flexibility to start chipping away at a mountain of debt.

Strong profit growth of 8.5 percent last year suggests there might be a solid pickup in industrial investment this year, although many analysts still expect China’s overall economic growth to cool from 6.7 percent last year to about 6.5 percent this year .

Industrial profits fell 2.3 percent in 2015.

Profits last month rose 2.3 percent from a year earlier to 844.4 billion yuan (US$122.72 billion), the Chinese National Bureau of Statistics said yesterday, slowing sharply from growth of 14.5 percent in November last year.

However, the earnings recovery remained uneven across the industrial sector, with coal miners and processors such as steel mills and oil refiners continuing to see sharper gains than other firms.

Profits in the coal mining sector surged 223.6 percent last year, while those for iron and steel production and processing companies rose 232.3 percent.

A narrower loss for the mining sector and stronger profit growth in equipment and high-tech manufacturing contributed to the overall earnings turnaround last year, the bureau said.

However, part of the reason for the strong numbers last year was simply due to a weak base of comparison from the previous year and the foundation for further improvement in the industrial sector was not stable, the bureau added.

“Average profit growth over the last two years has not kept up with output growth,” the bureau said in a statement. “An unreasonable demand structure, difficulties collecting funds and high costs are a drag on corporate profits.”

Indeed, the amount of time it took companies to collect payments last year rose to 36.5 days, while the increase in accounts receivables accelerated to 9.6 percent.

The efficiency of production also fell, with companies having to invest more to generate the same amount of revenue as in the past.

The slower profit growth last month was due to volatility in oil prices and adjustments by some firms to their product structure, the bureau said.

Profits for firms that make PCs and other electronic equipment last month fell 10.5 percent, after rising 45.4 percent in November, possibly due to fewer new product launches at the end of the year.

Chinese state-run firms fared worse than the broader industrial sector, with profits at government-owned firms rising only 1.7 percent last year, the Chinese Ministry of Finance said earlier yesterday.

Profits at state firms totaled 2.3 trillion yuan for the year, while revenue rose 2.6 percent to 45.9 trillion yuan.

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