Baotou Steel Rare-earth 2012 announces Preliminary Results
Inner Mongolia Baotou Steel Rare-Earth (Group) High-tech Co. (IMBREHT), China’s leading rare earth producer, announced its preliminary results on Tuesday. The Company said that 2012 net profit fell about 50%-60% year-on-year due to weakened demand and lower rare earth prices. The company’s final annual report will be released on March 30, 2013.
In the first nine months of 2012, the company’s net profits amounted to 1.69 billion Yuan and revenue was 8.26 billion Yuan with earnings per share at 0.698 Yuan, according to the financial statement for its Q3 2012. In 2011, net profit was at 3.48 billion Yuan with revenue reaching 11.53 billion Yuan in 2011, according to the annual report filed with the Shanghai Stock Exchange.
In order to help stabilize slumping prices in the domestic rare earth market, Baotou Steel Rare-Earth has had to halt some of its smelting and separation operations production for three consecutive months since October 23, 2012. However, but the interruption had only a limited effect on the market price during the past three months. “It is not until late February that rare earths production will resume”, said Zhang Rihui, the company’s Vice General Manager.
In my view, in the background of sluggish global economy in 2012, compared with 2011, Baotou Steel Rare-Earth reported a large net profit slump for the year. This result was unsurprising, because, as we all know, the level of rare earth price was at the highest point in its history in 2011.
Although China’s rare earth downstream industries remain soft at present, according to the latest report published by Beijing Zhong ke San huan, China’s largest rare-earth permanent magnets producer, rare earths destocking has been drawing to a close. Therefore, I would not be overly concerned with the profitability of Baotou Steel Rare-Earth in 2013. After all, the company’s rare earth ore products cost less than Molycorp in the global rare earth market.
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