MNI: China Nov Industrial Profit Growth Eases to 7-Month Low

     BEIJING (MNI) - Profit growth of Chinese industrial companies softened in

November on lower input and output prices as well as higher costs, the National

Bureau of Statistics (NBS) said Wednesday.

     The combined profits of industrial firms rose 14.9% year-on-year to

CNY785.82 billion in November, the weakest monthly growth this year since the

14.0% rise recorded in April and a drop of 10.2 percentage points from October.

     From January through November, total industrial profits rose 21.9% to

CNY6.88 trillion, decelerating from the 23.3% gain in the first 10 months but

sharply higher than the 9.6% growth in the same period of last year.

     He Ping, an NBS economist, attributed the slowdown of profit growth in

November to the drop in prices. "Profits resulting from price changes increased

CNY62.8 billion year-on-year in November, a reduction of CNY94.4 billion from

October, which means lower prices dragged down total profit growth for the month

13.8 percentage points," He said.

     In November, output prices of industrial companies rose 5.8% year-on-year,

1.1 percentage points lower than October, which was the first drop this year.

Input prices grew 7.1%, a drop of 1.3 percentage points, the NBS said. 

     --PRODUCTION COSTS RISE

     In addition, production costs rebounded in November, ending four

consecutive monthly falls. Every CNY100 of income generated by an industrial

firm's primary business cost CNY85.52, or CNY0.29 higher on an annualized basis.

     "Part of the raw materials in storage were bought when prices were still

high, so the process of cutting costs has been impacted as prices fall, which is

a concern," He warned. 

     However, overall operating efficiency has continued to improve, the NBS

stressed.

     Out of the 41 main industrial sectors, 39 saw profit growth in the first 11

months of the year, the NBS said.

     Mining industry profits rose 2.9 times to CNY443.4 billion, compared with a

growth rate of 4.1 times in the January-to-October period. Manufacturing

industry profits rose 18.9% year-on-year to CNY6.04 trillion, compared with

20.1% growth in the first 10 months of the year. But power-production industry

profits fell 12.8% year-on-year to CNY390 billion, compared with 16.3% decrease

in the first 10 months of the year.

     Costs in the first 11 months continued to fall. Every CNY100 of income

generated by an industrial firm's primary business cost CNY92.75, CNY0.5 lower

than the same period last year, He Ping said, adding the profit ratio was 6.36%

year-on-year from January to November, up 0.54 percentage point from the same

period last year. 

     Income of industrial firms' main businesses rose 11.4% to CNY108 trillion

in the January-November period, compared with 12.4% growth in the first 10

months of the year, the NBS said.

     The companies' primary business income out of every CNY100 assets was

CNY109.6, CNY3.8 higher than in the January-November period last year. 

     "The leverage ratio and operating risks of companies continued to drop," He

Ping said, explaining that the debt-to-asset ratio fell 0.5 percentage point to

55.8% by the end of November.

     --POWERHOUSE SECTORS

     The NBS singled out four sectors whose newly added profits contributed

52.8% of total industrial profit growth to CNY650.7 billion in the first 11

months of the year, including coal mining and washing, ferrous metal processing,

chemical materials and products manufacturing, and petroleum and natural gas

extracting.

     Profits of the coal processing sector rose 3.6 times y/y in the

January-November period, compared with an increase of 6.3 times in the first 10

months of the year, the NBS said. Profits of the ferrous metal processing sector

rose 1.8 times, unchanged from January-October.

     In the year to date, state-owned enterprise profits rose 46.2% year-on-year

to CNY1.58 trillion, compared with 48.7% growth in the first 10 months of the

year. Listed companies' profits rose 23.9% year-on-year to CNY4.80 trillion,

compared with 25.3% growth in the first 10 months of the year.

     High-tech manufacturing saw rapid growth. In the first 11 months, the

income of the main businesses in the high-tech manufacturing sector grew 13.4%,

two percentage points higher than the total income of industrial firms' main

business, He Ping said. 

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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