Due to the decline in the increase in business revenue and profits, the profits made by industrial enterprises continued declining in April. The iron & steel, automobile and chemical engineering and other industries saw obvious declines in profits growth.
Based on the financial data of industrial enterprises released by the National Bureau of Statistics (NBS), in the first four months of 2017, the profits made by industrial enterprises above the designated size recorded a year-on-year increase of 24.4 percent, and the growth rate was down by 3.9 percentage points over the first three months. The profit hiked 14 percent in April, and the growth rate was down by 9.8 percentage points over March.
It is the second consecutive month that the total profits growth of industrial enterprises declined. The decline is mainly a result of the declining growth in business revenue and profit margin of industrial enterprises, indicated Li Huiyong, an analyst from Shenwan & Hongyuan Securities Co., Ltd.
Li indicated that due to the higher cost of raw materials and tightening policies, the profit margin reduced from 6.47 percent in March to 5.79 percent in April and the growth in the profit margin dropped from 8.2 percent in March to 1.76 percent. Simply, the declining business revenue drove the profit growth of enterprises down by 2.4 percentage points while the profit margin growth was down by 6.4 percentage points.
For specific industries, the profit growth in the iron & steel, automobile and chemical engineering industries slowed down significantly.
Statistics show that the profit of the refinery and rolling of ferrous metals decreased 7.8 percent year on year in April, compared with an increase of 130 percent in March. The profit of the automobile manufacturing industry declined 6.7 percent, compared with an increase of 18.7 percent in March. The chemical materials and chemical manufacturing industry saw an increase of 13 percent in profits and the growth was down by 20.8 percentage points from March.
Despite slower growth in profits of industrial enterprises, it is a reasonable return of the previous high growth, indicated He Ping, an official with the NBS Department of Industrial Statistics. On the whole, the industrial profit maintained sound growth.
The consumer goods manufacturing and high-tech manufacturing industries are increasingly supporting the growth in profits.
Based on the statistics of the NBS and among the new profits of industrial enterprises above the designated size in April, the consumer goods manufacturing industry contributed 21.6 percent, representing an increase of 9.8 percentage points from March. The high-tech manufacturing industry contributed 23.2 percent, representing an increase of 19 percentage points. The raw materials manufacturing industry contributed 22.9 percent, representing a decrease of 15.2 percentage points from March.
Li indicated that the overall profits of enterprises remains high and supports the economic growth. But the high cost affected the profit margin of enterprises. Investors should pay attention to the financial pressure of enterprises as a result of the tightening policies.
He also pointed out that in order to maintain stable growth in industrial profits, investors should pay close attention to the following two problems. Firstly, the growth of the purchase price of raw materials has exceeded the ex-factory price of products, which resulted in the higher cost in the whole industry, the mid-stream and downstream industries in particular. Secondly, the excessive growth in financing fees also brings higher pressure on the financing cost of enterprises.
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