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Mainland firms bleed heavily in 2008

By Zhou Yan (China Daily)
Updated: 2009-02-26 07:53

Over a thousand publicly traded firms that had released their full-year or preliminary earnings reports as of yesterday, have posted a 43.61 percent drop in profits, at 173.6 billion yuan, for 2008.

In contrast, these 1,009 companies had posted a 32.18 percent year-on-year increase in profits last year, a report by TX Investment Consulting showed.

Ever since the first annual report was released on January 15, 93 companies have come out with financial results, with 14.3 billion yuan in combined net profit in 2008, up 15.6 percent from 2007.

An elderly investor is seen in front of an electronic board showing stock information at a brokerage house in Haikou, Hainan province, Feb 25, 2009. Over a thousand publicly traded firms that had released their full-year or preliminary earnings reports as of Wednesday posted a 43.61 percent drop in profits, at 173.6 billion yuan, for 2008. [Asianewsphoto]

According to figures compiled by Securities Daily, about 158 companies would release their annual earnings reports this month, indicating that the reporting season would peak over the next two months.

Related readings:  Steel makers' net profit plummets in '08  China Merchants Group's profit falls 29% in 2008  Net profit of Bank of East Asia plunges 98%

So far, 916 preliminary earnings reports for 2008 have shown that losers outnumbered gainers. Only 41 percent have been projecting profit gains for 2008.

The estimated combined profit was down by 46.1 percent in 2008, to 159.2 billion yuan.

"The economic crisis has taken a heavier than expected toll on Chinese companies. The bleak figure will mean more downside risks for the stock market," said Wu Feng, TX Consulting's analyst.

Cyclical sectors such as airlines, steel and oil refining were the worst hit last year, he said. Sinopec, for instance, said in its preliminary earnings report that its 2008 net profit would drop by over 50 percent, to less than 28.3 billion yuan.

In contrast, small and mid-sized enterprises did a better job. The 134 SMEs that have released preliminary or annual earnings have made a profit of 11.25 billion yuan in 2008, a 6.63 percent growth from 2007.

These 1,009 companies, however, contributed only 32.18 percent to the total profit amount of the over-1,500 listed firms in 2007.

Some of the largest blue chips by market capitalization like Industrial and Commercial Bank of China have yet to release their reports.

"In February, growth stocks occupied the biggest proportion among the published annual results. But coming into March and April, more reports from large-caps and badly-performing companies will be out," said Zhang Gang, an analyst with Southwest Securities.

He said mainland stocks would be weighed down by the forthcoming bad earnings results over the next two months.