Friday, 29 Jul 2011

Huludao Zinc Industry reported a loss of CNY 211 million in net profit in the H1 of 2011 plummeting 1,373% YoY. Revenue increased 17.06% YoY to CNY 3.7 billion during the reporting period.

This nonferrous metal producer incurred losses of CNY 300 million and CNY 1 billion between 2007 and 2008. The company earned 63.22 million in 2009 as it received the subsidy. In 2010, the company incurred a loss of CNY 583 million. The company attributed the poor operating performance to a low zinc ingot price in the market and high smelting costs.

According to a recent smelting industry research report, the capacity utilization ratio for China’s zinc industry was 78.96% in the H1 of 2011, a 5 year low. Also, the growth of zinc output fell to 2.14% in the H1 of 2011 from 31.01% in the same period in 2010.

Yunnan Chihong Zinc & Germanium another zinc smelting company earned profit during 2008 to 2010. It reported a 12% increase in net profit in the Q1 of 2011 to CNY 95.53 million.

The analyst in the securities thinks the losses in Huludao Zinc are because it does not have any mining assets. The import of zinc ore declined 8.5% to 1.38 million tonnes in the H1 of 2011 which influenced domestic zinc smelting enterprises.

China Metallurgical Group Corporation which owns a zinc mine bought Huludao Zinc in 2007 and injected CNY 2 billion into it for 51.06% stake. However, MCC did not inject its zinc mine assets into Huludao Zinc, so that the company had to spend high cost to purchase zinc ore for smelting.

The analyst at the Shanghai Metals Market thinks electricity restrictions in some provinces and the decline of imported zinc ore from overseas will continue to affect China’s zinc smelting enterprises.

(Sourced from www.capitalvue.com)