Angang Steel shares dive after profit warning By Alison Leung
HONG KONG, Jan 21 (Reuters) - Shares in China's Angang Steel Co Ltd (0347.HK) fell as much as 12 percent on Wednesday after the firm forecast a bigger-than-expected 55 percent earnings drop in 2008 on high raw material costs and slumping steel prices.
The steel maker 000898.SZ, the listed arm of one of China's top steel makers Anshan Iron and Steel Group, said on Tuesday its net profit was seen falling to about 3.42 billion yuan ($500 million) last year based on Chinese accounting standards [ID:nSHA354440].
The earning guidance came in well below market consensus of 7.8 billion yuan from 18 analysts polled by Reuters Estimates.
"Though investors had expected a bad Q4 result, the magnitude of Angang's loss is surprising," UBS said in a research note on Wednesday.
Angang is forecast to post a loss of 4.8 billion yuan in the fourth quarter, hit also by a 1.8 billion yuan provision for the impairment loss of inventory, said Helen Lau, an analyst at Daiwa Institute of Research.
The stock hit a session low of HK$6.94 before recovering to HK$7.29, down 8 percent at noon. Its rival Maanshan Iron & steel (0323.HK)(600808.SS) lost 4.3 percent and Chongqing Iron & Steel (1053.HK)(601005.SS) eased 2.9 percent.
The index for major Chinese companies listed in Hong Kong .HSCE was down 2.4 percent.
Chinese steel makers are being hit by sharp profit declines as rampant growth fuelled by an economic boom ran out of steam over the last few months amid the global financial crisis.
UBS expects negative earnings surprises through the results season and a potential steel price correction in the near term will hang over China's steel industry, the largest in the world.
But BNP upgraded Angang to hold recently from sell due to a spot steel price rally on the back of China's policies to stimulate the economy.
"The worst is over. The result just reflects the terrible fourth quarter last year," said Lance He, an analyst at BNP Paribas.
"With the steel price rally, we expect earnings to recover sequentially from the first quarter of 2009," he added.