Industrial earnings bounce back in March

Updated: 2012-04-28 07:51

By Wei Tian (China Daily)

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Industrial earnings bounce back in March
Workers at assembly lines at Fujian Jinjiang Sanli Engine, a company that specializes in businesses ranging from precision die casting and machinery to the production of motorcycles. The profits of State-owned and large non-State industrial enterprises picked up in March by 4.5 percent year-on-year. Chen Feng / For China Daily

Monthly figure rises 4.5% but overall picture remains gloomy

Rebounding industrial profits in March send a positive signal but the overall shrinking margins in the first quarter mean there is little cause for optimism, as the market still expects further policy support to restore confidence.

The profits of State-owned and large non-State industrial enterprises picked up in March by 4.5 percent year-on-year, after the figure declined for two consecutive months, according to a statement on the website of the National Bureau of Statistics on Friday.

But overall profits in the first quarter, which totaled 1.04 trillion yuan ($165 billion), were still 1.3 percent smaller compared with the same period last year.

He Ping, an official with the industry department of the NBS, attributed the overall decline in profits in the first quarter to pessimistic sales figures and rising costs caused by surging prices.

According to He, factory gate prices were up 19.8 billion yuan from January to March, while purchase prices surged by 121.4 billion yuan, which brought industrial profits down by 101.6 billion yuan.

The profit margin of 5.28 percent in the first quarter was slightly up from 5.02 percent in the first two months, but was still lower than the average of 6 percent last year.

The profit data were in line with an earlier release from the NBS, which showed that China's industrial output was growing at its slowest pace since July 2009, up 11.6 percent year-on-year in the first quarter of this year, compared with 20 percent a year ago.

Companies included in NBS statistics each have more than 20 million yuan in revenue from their main businesses.

Among them, State-owned enterprises' profits were down 12.4 percent year-on-year due to shrinking revenue in upstream industries, while the profits of overseas-funded companies dropped 12.6 percent year-on-year due to weak global demand and an appreciating yuan.

However, private and collectively owned enterprises managed to achieve an overall growth in profits of about 20 percent.

Continued incentives for private business and reduced investment support to SOEs are the reasons for the varying performance.

Among the 41 surveyed industries, 27 of them, including the oil and gas, farm and sideline products, automobiles, and power industries, reported an increase in profits.

Another 11 industries, including the chemicals and ferrous metals industries, saw their profits decline.

A report by the Agricultural Bank of China Ltd said processing industries in the middle of the industrial chain are facing heavier burdens, as rising costs cannot be passed on to downstream industries due to sluggish market demand.

"Although the situation cannot be reversed at present, it is unlikely that profits will drop as dramatically as during the 2009 crisis, because the main cause of the decline is now rising costs rather than an economic downturn," said the report.

Liu Tiejun, a macroeconomics analyst with Haitong Securities, said rebounding profits in March had sent a positive signal, and industrial profits will turn positive in the second half of the year as the effect of incentive policies is increasingly felt.

Liu predicted year-round industrial profits of around 5 percent.

weitian@chinadaily.com.cn

Industrial earnings bounce back in March

(China Daily 04/28/2012 page9)

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