Negative outlook for most listed firms in Q3

17  January 2013

More than half of the listed companies in the Shanghai and Shenzhen stock exchanges are expecting losses or growth slowdowns in the third quarter because of rising costs and overcapacity, according to Securities Times.

Among 965 listed companies that have disclosed performance predictions for the third quarter, 489 estimated losses or reduced profits. Many companies said they have seen no significant improvement from the second quarter.

The steel industry has been hit especially hard. Chinese steelmaker Guangdong Shao-steel Songshan Co posted an estimated loss of 1.35 billion yuan ($213.93 million) in the third quarter, while it earned 2.08 million yuan net profit during the same period last year.

Late last year, Shao-steel had a dramatic decline in net profit and posted a loss of 1.13 billion yuan by the end of 2011. The company did not stop the downward trend, as its net loss for the first half of 2012 was 780 million yuan.

The rapid decline in steel prices, rising financing costs and greater operating pressure are all factors contributing to the loss, the company said.

Shao-steel is not the only money-losing steelmaker, Analysts say that significant improvement for the steel industry in the short term is difficult, as it is hard to change the industry’s current situation of “high costs, high capacity, high inventory, and low price, low demand, low sales”.

Steel-related industries, including real estate, automobiles and architectural decoration, also have woeful outlook. Twenty real estate companies and 22 auto companies forecast negative growth or losses for the third quarter.

Fortunately, the other listed companies are still making money. Among 476 companies that estimated growing profits, 55 are expected to double their profits compared with the same time last year.

Shijiazhuang Baoshi Electronic Glass Co expects its third-quarter net profit to reach 100 million yuan as a result of increased sales in LCD glass substrate manufacturing equipment. In the third quarter last year, the company had a net loss of 2.27 million yuan.