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Maanshan Iron & Steel (600808) Co., China's second-largest Hong Kong-listed steelmaker by market value, posted a 49 percent drop in profit in the first half because of higher fuel and iron-ore costs.
Net income fell to 1.09 billion yuan ($137 million), or 0.1689 yuan a share, from 2.1 billion yuan, or 0.3295 yuan, a year earlier, Maanshan Steel said in a statement to the Hong Kong stock exchange today, citing international accounting standards. Sales fell to 16.1 billion yuan from 16.7 billion yuan at the company, based in the eastern province of Anhui.
The cost of iron ore bought under contract surged 19 percent in 2006, driven by soaring Chinese steel production and limited mine expansion. Steel prices were lower on average than a year earlier even as demand for cold-rolled steel used in cars and appliances rebounded.
``The company is suffering from growing industry capacity and rising iron-ore prices,'' Zhu Libin, analyst of Shenyin Wanguo Securities Co. in Shanghai said before the announcement. ``The company's profit will continue to decline this year.''
Zhu expects Maanshan Steel's earnings per share to fall 20 percent to 0.36 yuan this year from 2005.
Maanshan Steel's shares fell 1.2 percent to HK$2.4 in Hong Kong before the earnings were released. The shares have fallen about 8 percent this year, compared with a 27 percent increase in the Hang Seng China Enterprise Index.
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