SINGAPORE (May 8): Delong Holdings, the China-based steel manufacturer, reported a 46.2% fall in 1Q19 earnings to RMB151 million ($30.3 million) from RMB280.8 million a year ago.
Group revenue increased 17.1% to RMB3.45 billion due to an increase in the volume of hot rolled coil (HRC) sold amid growing demand from the construction and infrastructure sectors, despite a decrease in average selling prices.
Total cost of sales increased 23.9% to RMB3.11 billion primarily due to higher volume of products sold as well as increased raw material prices.
In 1Q19, the group sold 941,316 tonnes of HRC, compared to 817,663 tonnes of HRC in 1Q18, an increase of 15.1%.
Gross profit margin decreased by 4.9 percentage points to 10.0% primarily due to the decrease in average selling prices of products sold, coupled with higher cost of sales per tonne.
Finance expenses increased to RMB82.2 million from RMB29.6 million due to higher bank borrowings drawdown for working capital purposes.
In its outlook statement, Delong says China’s ongoing trade war with the United States and the government’s efforts to rein in risky lending may continue to weigh on overall growth.
The risk of oversupply in the steel industry remains a core concern as production climbed almost 10% year-on-year to 231 million tonnes for the January to March quarter.
Meanwhile, the group’s 45%-owned joint-venture steel project in Indonesia remains on track to be operational by end June.
No dividend has been declared for 1Q19.
Shares in Delong closed 1 cent higher at $5.75 on Wednesday before the results were announced.
