China Inc. earnings rise on resource rebound, public spending

China Inc. earnings rise on resource rebound, public spending

HONG KONG/ SHANGHAI — All of a sudden, corporate China is making a lot more money again. Net profit for listed companies in the first half grew by 16% on the previous year, thanks to rising resource and property prices along with state-supported infrastructure spending.

 Companies for which comparable 2016 figures are available logged a total of 1.674 trillion yuan ($251 billion) in black ink for the January-June period, data from research firm Shanghai DZH shows, recovering from a 4% drop a year earlier. The firm surveyed 3,357 companies, covering virtually all of those listed in Shanghai and Shenzhen bourses, many of which have a dual listing in Hong Kong. Revenues climbed almost 20% over the same period to 18.166 trillion yuan.

One of the major driving forces was a rise in resource prices.

PetroChina, the country’s largest oil and gas producer, recorded 12.68 billion yuan of net profit in the first-half, a 24-fold jump from the same period last year. Lifted by a rebound in crude prices, the latest results beat its own 9 billion yuan projection to 11 billion yuan.

The company is paying out the full figure as an interim dividend to shareholders. The announcement, however, sparked speculation about its timing, when the government is pushing for “mixed-ownership” reforms — an attempt to bring private investors into large state-owned companies — as the top beneficiary of a heavy dividend will be its state-owned parent firm China National Petroleum Corporation, or CNPC, which has an 86% stake in the listed company.

Wang Dongjin, vice-chairman and president at PetroChina, justified the hefty payout, stressing that it was the result of “improving business operations and cash positions.” Wang is also the vice president of CNPC.

Combined net profit of the three state-owned oil companies including PetroChina jumped 350% on the year to 56.7 billion yuan. China Petroleum & Chemical (Sinopec) rose 40% to 27.9 billion yuan, while offshore driller CNOOC swung to a 16.2 billion yuan profit from a 7.7 billion yuan loss. During the period, Brent oil prices, the international crude benchmark, soared 30% on the year to about $51.80 per barrel.

The resource price bonanza also benefited coal producers. China Shenhua Energy, the largest by volume in the country, recorded a 142.9% year-on-year jump in its net profit for the first six months to 26.3 billion yuan, on the backdrop of rising coal prices.

The company expects coal prices to be range bound at around 550 yuan per ton throughout the year, suggesting a year-long rally to go on.

On the same day, the country’s state-owned assets supervisor announced a merger between its parent, Shenhua Group, and electricity supplier China Guodian to form the new entity National Energy Investment. Shenhua Energy, like PetroChina, surprised the market in March by announcing a special cash dividend totaling 49.92 billion yuan, far exceeding the company’s full-year net profit for 2016. Observers widely speculated the move was aimed at funneling cash to its wholly state-owned parent, which has a 73% stake in the listed company, before the merger.

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