China
Chinese industrial companies' profits grew at the slowest pace in almost three years as government controls to stem inflation prevented oil refiners and power generators from raising prices.
Combined net income rose 16.5 percent in January and February to 348.2 billion yuan ($49.6 billion) from a year earlier, the statistics bureau said today. The gain was 44 percent in the first two months of 2007.
Oil and coal prices rose to records in February and China's worst blizzards in half a century disrupted manufacturing and power generation in the world's fastest-growing major economy. Oil refiners posted a loss of 20.6 billion yuan, compared with a 15.6 billion yuan profit a year earlier.
“Margins will continue to be squeezed by government price controls,'' said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “The controls aren't likely to be relaxed because of current inflation risks.''
The key CSI 300 Index fell 2.3 percent as of 1:03 p.m. in Shanghai.
Baoshan Iron & Steel Co., China's biggest maker of the alloy, fell 6.8 percent after reporting its first profit decline since 2001. China Petroleum & Chemical Corp., the nation's largest oil refiner, declined 5.6 percent.
Inflation, Energy
“There's concern corporate profits may keep sliding in the first quarter, and that's hurting demand for shares,'' said Mo Fan, an analyst at Soochow Asset Management Co. in Shanghai.
China is trying to tame inflation that surged to an 11-year high of 8.7 percent in February.
The government controls energy prices and said in January that they would stay frozen for an unspecified period. Oil rose above $100 a barrel in February and coal climbed to records at Australia's Newcastle port, a benchmark for Asia.
Power generators' profits fell 61 percent in the first two months from a year earlier easy payday loans savings account payday advance. That decline and refiners' losses slashed 16 percentage points from overall profit growth, China International Capital's Xing estimated.
Huaneng Power International Inc., the largest Chinese power producer listed in Hong Kong, on March 25 reported a 16 percent drop in second-half profit as coal costs eroded earnings.
Overall, China's industrial company sales gained 27.4 percent to 6.3 trillion yuan.
“More expensive raw materials, higher wages, increased borrowing costs and weakening export demand will weigh on companies' earnings this year,'' said Shen Minggao, an economist at Citigroup Inc. in Beijing.
Earnings may also take a knock from companies' own share market investments. The CSI 300 has fallen 28 percent this year after climbing more than 160 percent in 2007.
Cooling Economy
Weaker profit growth may aid government efforts to cool the world's fourth-biggest economy by reducing the amount of money available for investment. Premier Wen Jiabao has named overheating as one of the key threats in 2008.
Coal industry profits climbed 67 percent in the first two months and oil and gas exploration profits surged 61 percent, the statistics bureau said.
The slowing of overall industrial profit growth came after the government previously reported a cooling of the pace of the expansion of industrial production.
Output grew 15.4 percent in January and February, the smallest increase in more than a year as the snowstorms disrupted power supplies and transportation. Exports grew 6.5 percent last month, the slowest pace in almost two years.
The industrial profit figures are for companies with annual sales of more than 5 million yuan.
Filed under: money by John