SINGAPORE (Feb 27): Delong Holdings reported FY17 earnings of RMB2.1 billion ($433 million), up 10 times from RMB213 million a year ago as average selling prices of hot rolled coil (HRC) soared.
See: Delong is third top gainer after positive profit guidance
This came after it reported 4Q17 earnings more than doubled to RMB327.3 million from a loss of RMB401.9 million a year ago.
Revenue for 4Q rose 9.9% to RMB2.98 million principally due to continued increase in ASPs of HRC driven by higher infrastructure and construction activities in China, despite lower sales volume in the quarter.
The decrease in sales volume was mainly due to the cessation of Aoyu Steel’s operations in August 2017 coupled with the shut down of Delong Steel’s blast furnaces amid the maintenance exercise and China's environmental policies.
In 4Q17, the group sold 822,841 tonnes of HRC and 60 tonnes of steel billets as compared to 865,455 tonnes of HRC and 30 tonnes of steel billets in 4Q16. Overall sales quantity decreased by 42,584 tonnes or 4.9%.
Total cost of sales decreased slightly by RMB10.3 million or 0.5%, from RMB2.24 billion in 4Q16 to RMB2.23 billion in 4Q17. The decrease was primarily due to lower sales volume as mentioned above, partially offset by higher raw material prices in 4Q17.
Gross profit increased by 59.3% to RMB746.1 million in 4Q17 from RMB468.4 million in 4Q16. Gross profit margin increased by 7.8 percentage points to 25.1% in 4Q17 from 17.3% in 4Q16. The increase was primarily due to the significant increase in average selling prices of products sold which outpaced the increase in raw materials prices in 4Q17.
Other losses decreased by RMB662.2 million to RMB37.3 million in 4Q17 from RMB699.5 million in 4Q16, primarily due to the one-off impairment charge of RMB600 million provided on Aoyu Steel’s production facilities in 4Q16.
In its outlook, Delong says domestic demand for steel in China is expected to remain stable in 2018 amid the steadily-growing national economy, with a focus on quality over quantity.
However, environmental issues remain high on the agenda of the China government, with continued efforts and resources directed towards the tightening of its environmental protection rules to control pollution sources.
Shares in Delong closed 4 cents lower at $4.89 on Tuesday.
