Wuhan Iron & Steel Group Co., Ltd. Two Iron and Steel Giants Make First Half Net Profit in First Half Year

Despite the pressure of rising raw material costs, the domestic steel giants WISCO and Angang also announced their first-half performance at the same time today.

WISCO (600005.SH)'s first-half performance report showed that the company’s net profit attributable to shareholders of listed companies for the first half of the year was 1.226 billion yuan, a year-on-year increase of 14.73%. The company’s basic earnings per share for the first half of the year was RMB 0.125, an increase of 11.61% year-on-year.

In the first half of this year, WISCO’s operating income was RMB50,822 million, a year-on-year increase of 23.22%; the Company’s headquarters of Qingshan Iron & Steel, Iron & Steel, respectively produced 8.474 million tons, 8.87 million tons and 8.982 million tons of steel, up 10.98% and 10.4% respectively over the same period last year. 13.57%.

Although operating income and profits both increased year-on-year, Wuhan Iron and Steel Co., Ltd. also stated in its semi-annual report that due to the increase in raw fuel prices and the increase in sales costs, the gross profit margin has declined.

For the second half of the year, Wuhan Iron and Steel Co., Ltd. also believes that production and operations are facing more severe tests, and that “high output, high cost, and low efficiency” have become the main theme of the operation of the steel industry.

Compared with WISCO, Angang Steel, which was also trapped in raw material costs, had a net profit of 220 million yuan attributable to shareholders of listed companies in the first half of the year, a sharp drop of 92% year-on-year. The company's basic earnings per share was 0.03 yuan, which also decreased by 92.11% year-on-year.

Regarding the reasons for the decline in profits, Angang Steel pointed out that mainly due to changes in the environment of the steel market, the increase in raw fuel prices was greater than the increase in steel prices, and the benefits brought by the increase in steel prices could not make up for the increase in cost caused by the increase in raw fuel prices.

In this regard, Changyuan Securities analyst Liu Yuanrui expects that the ore needed for Anshan Iron and Steel Corp. will be purchased from the group company in the form of related-party transactions. The pricing model is based on the average price of the cif ore of the previous half-year ore and a 5% discount. Judging from the average price of CIF at the port of Qingdao ore, the pricing basis for the related transaction of ore in the second half of the year may still have an increase of more than 10% from the first half of the year, and the cost pressure is still heavy.

It is worth noting that prior to Anshan Iron & Steel, Maanshan Iron & Steel Co., Ltd., Liuzhou Steel Co., Shagang Steel and other steel companies suffered a decline in their first-half profits. Many industry sources pointed out to reporters that this year, iron ore spot prices The benchmark quarterly or monthly pricing mechanism has eroded the profitability of steel mills, while raw fuel prices such as coking coal and scrap have also been operating at high levels. The high cost of operation is an important reason that restricts the substantial expansion of steel mills' earnings.

However, Shanxi Securities analyst Liu Junqing predicted in the analysis report that in the second quarter, iron ore prices have risen to historical highs, but under the premise of a global steel market downturn and slowdown in consumption, the three major mine expansion projects will end at the end of the year. Completion and China's launch of the iron ore price index, under the influence of various factors, it has become inevitable that iron ore prices have fallen from high levels. The cost of steel enterprises can be effectively reduced, and profits will rise from the bottom.