March 29 (Bloomberg) -- Maanshan Iron & Steel Co., the second-biggest Hong Kong-traded steelmaker, said profit tumbled 94 percent last year, missing analysts’ estimates, as slowing demand cut prices and it wrote down inventory values.
Net income fell to 69.6 million yuan ($11 million), or 0.009 yuan a share, in 2011, from 1.1 billion yuan, or 0.143 yuan a share, a year ago, the Maanshan, Anhui province-based company today said in a statement that used Chinese accounting standards. The result missed the 337.5 million mean estimate of six analysts compiled by Bloomberg.
Profit margins for Chinese steelmakers dropped to a record low of 0.43 percent in November, as housing curbs and the withdrawal of stimulus measures for the automobile industry limited demand, China’s steel association said. The nation’s production may be unchanged or slightly higher this year as waning demand and rising competition weigh on prices, Gu Jianguo, Chairman of Magang Group Holding Co., Maanshan’s parent, said in an interview in March.
“Steelmakers’ profit may be further squeezed as the Chinese government has lowered development targets and iron ore prices remain high,” Maanshan said in the statement.
Premier Wen Jiabao pared China’s annual economic growth target to 7.5 percent this month, compared with a goal of 8 percent over the past seven years, as part of efforts to lessen China’s reliance on investment and exports for growth and increase the role of domestic consumption. That shift is slowing steel production growth, said BHP Billiton Ltd., the world’s third-biggest iron ore exporter.
Maanshan set aside 677 million yuan last year for a drop in the value of raw material and product inventories, it said, without giving further details.
Maanshan gained 0.9 percent to HK$2.17 at 9:47 a.m. in Hong Kong. The stock has lost 49 percent in the past year. Its stock in Shanghai fell 2.7 percent yesterday.
Still, railway construction in China may rebound from an investment trough last year, boosting demand for the company’s products, Magang’s Gu said in March. Maanshan, also China’s biggest maker of train wheels, received approval from the Ministry of Railways to start trial production of wheels for high-speed trains that can run at 200 to 250 kilometers per hour, the official Xinhua News Agency reported this week.
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