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Listed firms see revenue erosion

By Bi Xiaoning (China Daily)
Updated: 2009-02-20 08:01

Earnings of Shanghai Pudong Development Bank doubled in 2008. [China Daily]

The 936 listed companies that have announced their earnings estimates have indicated that they expect steep declines or losses in revenue for 2008.

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Including the 56 companies that have released their annual reports, the 992 companies realized net profits of 172.2 billion yuan in 2008, a 43.74 percent decline year-on-year, according to Tianxiang Investment Consulting Co.

Tianxiang also estimated that companies in the coal, construction, communications, shipping and banking sectors are more likely to see a full-year growth for 2008, while the ones in hotel tourism, civil aviation, highways, insurance, securities, electricity, petrochemicals and steel industries may see a weakened business performance.

Among the top 10 companies in terms of net profits in 2007, six said their earnings would drop over 50 percent in 2008 with Huaneng Power International even predicting an annual loss.

Bucking the depressing financial results of the seven heavyweights mainly in insurance, petrochemicals and power industries, two companies in the banking sector have performed well.

Shanghai Pudong Development Bank said its earnings doubled in 2008 to touch 12.51 billion yuan while China CITIC Bank is expecting a 60-percent growth.

However, industry analysts said commercial banks, despite a good performance in 2008, appear headed for tougher climes this year due to narrowing interest spread and rising non-performing loans.

Everbright Securities Co said the earnings of the banking industry would drop 15 percent this year.

"Banking shares have already undergone an adjustment recently, reflecting the market concerns on further interest rate cuts and potential non-performing loans," said Everbright Securities analyst Jin Lin, adding that the current interest rate is already close to a historic level.

The firm also estimated that the net interest margin (NIM) of banks would drop 43 basis points from the current 300 basis points this year.

"If the interest rate is cut further in the first-half, the NIM will drop another 20 basis points in 2010, which means the banks' performance would be affected next year also," said Jin.

To analyze the non-performing loans of the banking sector, the real estate industry also needs to be accounted for. So far, among the 64 real estate companies that have announced their earnings estimates for 2008, about 47 percent said they expect sharp declines or losses on falling revenue.

Industry experts said the performances have reflected the depressed state of the realty market in the country, marked by dwindling sales and falling prices.

According to Great Wall Securities, sales of commercial and residential properties in big cities, such as Beijing and Shanghai, have dropped about 40 percent year-on-year in 2008, while the sales in some second-tier cities, such as Nanjing, Hangzhou, Tianjin and Chengdu, fell about a half.

"The property market would take one or two years to recover and housing prices may drop another 10 percent in future. The real estate industry could touch a bottom this year, with earnings falling by 5 percent," said Huang Qinglin, analyst, Great Wall Securities.

Industry analysts also said that the real estate sector could bottom out in the second half, with the recovery of macro economy, the rising sales in the traditional peak season in May and favorable policies, such as setting up of real estate investment trusts (REITs) to ease property developers' cash constraints.

According to the earnings estimates for 2008, the performance of companies in coal and power sectors is in sharp contrast. Of the 23 companies in the coal industry, 19 reported an increase in earnings, while 30 of the 36 power companies said they would incur revenue declines or losses in 2008.