Cautious note on Q4 earnings | Shanghai Daily

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October 31, 2009

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Cautious note on Q4 earnings

BAOSHAN Iron and Steel Co expressed caution on its earnings in the current quarter after it posted its highest earnings in five quarters.

"The company faces adverse external factors in the fourth quarter," it said, citing overcapacity, falling prices, high inventories and slowing demand, especially for steel pipes and heavy plates.

Third-quarter net profit rose 6.7 percent to 3.04 billion yuan (US$445 million), or 0.17 yuan a share, it reported late Thursday, slightly beyond market expectations.

Baoshan Iron, the listed unit of China's biggest mill Baosteel Group Corp, attributed the third-quarter growth to rising demand and higher prices as well as cost cuts.

The strong demand for cars and home appliances benefited Baoshan Iron most as a big part of its products are for these segments, Sinolink Securities analyst Zhou Tao said.

Domestic steel prices have risen to a 10-month high in early August as the central government's 4-trillion-yuan stimulus spending spurred demand. But prices have fallen a fifth from that level as record steel output in August and September led to oversupply.

Baoshan Iron, having raised prices every month in the third quarter, cut prices for October and November.

Zhou said room for further cuts is limited as there is a sign of a market price recovery.

Ratings agency Moody's this week revised its outlook for Asia's steel sector to stable from negative.

"Underlying demand has been improving, most notably in China and India, driven by the government's stimulus program, which has a high infrastructure-related expenditure component, and also by the recovery in the auto and property sectors," Moody's analyst Terry Fanous wrote in a report.




 

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