Earnings expected to decline or fall into the red in first-half financial forecasts

Almost half of the companies listed on the mainland's two bourses that have so far released financial forecasts for the first six months expect to see a decline in earnings or to fall into the red, primarily due to falling demand amid an economic slowdown.

According to Wind Information Co Ltd, a leading provider of economic data and financial information, 845 companies listed on the Shenzhen and Shanghai stock exchanges had released January-June financial performance forecasts as of May 13.

A total of 384 companies forecast a slump in their net profit or a loss, accounting for 45.4 percent.

BOE Technology Group Co Ltd ranked first among those forecasting a loss, with the company expecting to fall into the red to the tune of 800 million yuan ($126.8 million) to 900 million yuan.

In addition, Beijing Shougang Co Ltd, Guodian Changyuan Electric Power Co Ltd and Northeast Pharmaceutical Group Co Ltd are also expected to suffer losses in excess of 100 million yuan.

Property developers and manufacturing companies account for the majority of poorly performing companies.

Twenty-three listed property developers have announced their first-half performance forecast, with 16 of them expecting to see a slump in net profit or even suffer a loss, accounting for 69.6 percent of the total.

In the manufacturing sector, out of 618 companies that have released a forecast, 264 reported a decline or a loss in earnings and 50 reported losses for the first time, while 29 continued to suffer a loss. Only 10 manufacturing companies expected to return to the black, according to Wind's statistics.

Property developer China Calxon Group Co Ltd forecast an estimated loss of 350 million yuan in the first six months, a year-on-year drop of 4,901.41 percent.

The company said the expected huge loss was due to the negative effect of the country's property market on its projected sales, accompanied by the small number of projects that could be settled in the first half of this year.

Analysts said that the fall in demand resulting from the economic slowdown was the main factor leading to the gloomy forecasts offered by many companies, according to Economic Information Daily.

The macro economy is destined to experience a continued dip and the overall decline in corporate profits will sustain as market demand continues to fall, Zhao Wei, a chief analyst at Founder Securities, told the Economic Information Daily.

Looking at first-quarter results, Xiao Bo, an analyst from Huarong Securities, said the machinery industry is still in a trough, as the downward trend in performance that started in the second half of 2011 has yet to be fundamentally reversed.

Li Huiyong, a chief analyst at Shenyin & Wanguo Securities Research Co Ltd, was quoted by the Economic Information Daily as saying that "the overall profitability of listed companies would decline year-on-year, but there will be an upward trend in their earnings throughout the year".

On the one hand, enterprises' gross profit ratio will improve with international bulk commodity prices expected to fall, while the macro economy will pick up in the third quarter from the dip in the second quarter, due to government policies boosting demand, Li said.

huangying@chinadaily.com.cn