October 12, 2008

Baosteel Q1 net profit up by 16% YoY

Chinese steel giant Baoshan Iron and Steel Co has reported a 16% rise in first quarter earnings as increased steel prices offset surge in raw material costs.

It posted a net profit of CNY 4.26 billion against CY 3.68 billion a year earlier. Its operating revenue in the first three months was CNY 47.03 billion up by 9.43% YoY and operating costs were up by 9.7% YoY to CNY 41.43 billion.

Its profits rebounded sharply from the October to December quarter, when earnings shrank to about CNY 2.17 billion because of weakness in the stainless steel market following a plunge in nickel prices.

It said "Deep cost cutting and increased efficiency maintained stable earnings growth in the first quarter, despite rising materials costs and fierce winter weather in China, which disrupted power supplies.”

Financing costs shrank by 69% to CNY 92.8 million during the quarter because the company made a foreign exchange profit as it increased US dollar financing and the yuan appreciated. Depreciation costs also improved by about CNY 370 million yuan because of a write back as the profitability of its stainless steel business improved.

Baosteel raised its major steel product prices as much as 8% for the first quarter of 2008 and then lifted second quarter prices a further 17% to 20%.