Chongqing Iron and Steel suffered from

"aftermath of relocation", with its main business losing over 5.8 billion yuan in four consecutive years

If there are not too many variables, Chongqing Iron and Steel may become a "loss *" for steel listed companies in 2013. Chongqing Iron and Steel recently announced that the expected annual loss for 2013 is about 2.5 billion yuan, marking the largest loss since its listing. In fact, excluding the huge government subsidies received due to relocation, Chongqing Iron and Steel has been losing money for four consecutive years, with a loss of over 5.8 billion yuan. Industry insiders point out that Chongqing Iron and Steel is suffering from the "sequelae of steel plant relocation". It invested a large amount of funds in the early stage of environmental relocation, but encountered a cold market winter after the production capacity was formed. As a result, a large amount of debt may take years to digest. Chairman resigns after the "loss *" pre loss of Baosteel In the entire steel industry, Chongqing Iron and Steel did not stand out in terms of scale or production, but suffered a huge loss in 2013. On the evening of January 22nd, Chongqing Iron and Steel announced that according to preliminary calculations by the finance department, there will be a loss in the annual operating performance of 2013, and it is expected that the net profit attributable to the shareholders of the listed company will be a loss of about 2.5 billion yuan. It is understood that Chongqing Iron and Steel suffered a loss of 1.699 billion yuan in the first three quarters of last year, with a loss range of * among 34 listed steel companies. Based on a simple calculation of 4.077 million tons of steel in the first three quarters, the loss per ton of steel produced in the first three quarters was as high as 416.7 yuan. On the other hand, ST Ansteel, a listed steel company that suffered a loss of 4.38 billion yuan in 2012, achieved a net profit of 765 million yuan in the first three quarters of last year, and its recent forecast showed a profit of 770 million yuan in 2013. It plans to apply for the withdrawal of delisting risk warnings after the release of its 2013 annual report. In addition, the overall profit of the steel industry improved slightly last year, which led to a major loss making company in 2013, including Anyang Iron and Steel, Ma Steel, and others. Therefore, from the current situation, Chongqing Iron and Steel is highly likely to take over the "loss *" hat of steel. It is worth mentioning that on January 24th after the release of Chongqing Iron and Steel's pre loss announcement, Chongqing Iron and Steel also announced that the board of directors received a written resignation report from Chairman Deng Qiang, who resigned from relevant positions such as director, chairman, strategy committee chairman, and nomination committee chairman of the company. Chongqing Iron and Steel stated in the announcement that Deng Qiang's resignation was "due to work adjustments", and emphasized that "Mr. Deng Qiang did not have any disagreements with the company's board of directors, nor did any matters related to resignation need to be brought to the attention of all shareholders". "The company expresses its gratitude to Mr. Deng Qiang for his contributions to the company's development during his tenure. According to the 2012 annual report of Chongqing Iron and Steel, Chairman Deng Qiang's term of office began on March 18, 2011 and ended at the 2014 Annual General Meeting of Shareholders. He served as the Deputy General Manager of the controlling shareholder, Chongqing Iron and Steel Group, and received his salary from Chongqing Iron and Steel Group. Multiple steel industry observers speculate that the resignation of the chairman of Chongqing Iron and Steel may be related to continuous losses in recent years, as well as factors related to the reorganization of state-owned enterprises after the current government reshuffle. However, regarding the specific reasons for Deng Qiang's resignation, NetEase Finance has repeatedly called the Secretary of Chongqing Iron and Steel and sent text messages for inquiries, but as of the time of publication, no response has been received. Recently, several domestic steel companies have undergone changes, including Hebei Iron and Steel Group, Shougang Group, and Liugang Group. Multiple loss-making steel mills have all been replaced, "according to industry analysts who analyzed NetEase Finance. Generally speaking, companies usually replace * at the end or beginning of the year, which is also the most obvious manifestation of industry problems. The overall difficulties of the steel industry are manifested in specific steel enterprises, which may be adjusted through replacement *. Suffering from "relocation sequelae" with a four-year loss of over 5.8 billion yuan For the significant loss of net profit in 2013, Chongqing Iron and Steel listed the reasons as follows: the continuous sluggish demand in the steel market, significant decline in steel prices, coupled with the company's product structure adjustment not yet in place, high production costs, and heavy financial burden due to environmental relocation. In fact, if Chongqing Iron and Steel had not received huge subsidies in 2010 and 2012 respectively, 2013 would be the fourth consecutive year of losses for Chongqing Iron and Steel. At the end of 2012, the Chongqing Municipal Finance Bureau and the Chongqing Changshou District Finance Bureau respectively allocated 1.5 billion yuan and 500 million yuan in subsidies to Chongqing Iron and Steel. As a result, Chongqing Iron and Steel achieved a net profit of 98.81 million yuan in 2012, while its net profit after deducting non recurring gains and losses was 1.869 billion yuan. Data shows that in 2011, Chongqing Iron and Steel suffered a loss of 1.47 billion yuan. In addition, in 2010, Chongqing Iron and Steel's net profit was only 10.009 million yuan, while the net profit after deducting non recurring gains and losses was 25.85 million yuan. That is to say, the total operating losses incurred by Chongqing Iron and Steel in the past four years exceeded 5.8 billion yuan. In addition, last year's interim report of Chongqing Iron and Steel showed that the total assets were 30.5 billion yuan, the total liabilities were 27.4 billion yuan, and the asset liability ratio was as high as 89.91%. Analysts have stated that similar to the "sequelae of steel plant relocation" that occurred in the relocation of Shougang in the past, it has also been reflected in Chongqing Iron and Steel. Due to the large amount of funds invested in the construction of projects during the early relocation period, it has encountered a cold market winter after the production capacity was formed, and a large amount of debt will take years to digest. It is reported that the environmental relocation project of Chongqing Iron and Steel and its controlling shareholder, Chongqing Iron and Steel Group, began in 2006 with the requirements of the Chongqing government for energy conservation, emission reduction, industrial layout, and strategic planning. In 2007, the project started without approval from the National Development and Reform Commission. According to the plan, Chongqing Iron and Steel Group's main industries were gradually relocated from Dadukou District, Chongqing to Changshou District, Chongqing, The Changshou new factory area is planned to be a high-quality steel production base in the upper reaches of the Yangtze River with an annual output of 6 million tons and an important shipbuilding steel production base in China. Therefore, the project claims to invest approximately 35 billion yuan. The investment in the early stage of (Chongqing Iron and Steel) environmental relocation was too large, and just like the relocation project of Shougang, it needs to be slowed down, a transition, and a period of time. "Analysts bluntly stated that Shougang implemented the relocation due to the Olympic Games. As a national level urban steel plant relocation project, its main project did not improve until last year, while Chongqing Iron and Steel, as a local government level urban steel plant relocation project, It may take a long time to turn around the deficit. Interestingly, Chongqing Iron and Steel's report last year already predicted losses in 2013 and 2014 in advance. It is expected to have a net loss of 2.55 billion yuan in 2013 and 550 million yuan in 2014. If the company is unable to avoid losses in 2013 and 2014, according to the listing rules of the Shanghai Stock Exchange, the company's A-share shares may be subject to delisting risk warning, i.e. "* ST" treatment, implemented by the Shanghai Stock Exchange. The flagship product is still in a cold winter, and it is difficult to achieve "immediate turnaround" It is worth mentioning that Chongqing Iron and Steel successfully completed the asset restructuring after environmental relocation at the end of last year, achieving the overall listing of the steel assets of Chongqing Iron and Steel Group. Chongqing Iron and Steel predicts that "if the steel industry improves in the future, our company's profitability will further enhance". It is reported that during the relocation process, starting from April 2010, Chongqing Iron and Steel Group gradually granted Chongqing Iron and Steel the assets related to the steel production in Changshou New Area, which was built and put into operation in batches, for free. In September 2011, Chongqing Iron and Steel Group successfully completed the environmental relocation. The agreement for the free authorization of asset use expired on March 31, 2012. In May 2012, Chongqing Iron and Steel announced a restructuring plan, stating that in order to address related party transactions and potential horizontal competition issues caused by environmental relocation, it plans to issue no more than 1.996 billion shares to Chongqing Iron and Steel Group for a price of 3.14 yuan per share, and acquire all assets and supporting public and auxiliary facilities related to steel production invested and constructed by Chongqing Iron and Steel Group in Changshou New Area with an estimated value of 19.834 billion yuan, At the same time, it will also raise supporting funds of 2.2 billion yuan through non-public issuance of shares to no more than 10 specific investment targets at a price of no less than 2.83 yuan per share. At the end of December 2013, Chongqing Iron and Steel announced that the company had completed the major asset restructuring and the procedures for purchasing assets through the issuance of shares to Chongqing Iron and Steel Group. At the same time, 2 billion yuan of supporting funds were raised in place. At this point, Chongqing Iron and Steel Group's steel assets have achieved an overall listing. The steel production capacity of Chongqing Iron and Steel has increased from about 3 million tons to about 6 million tons, and the leading products have increased from 2700mm medium plate and shaped bar wire products to four types: 1780mm thin plate, 2700mm medium plate, 4100mm medium thick plate, and shaped bar wire products. It is reported that more than half of Chongqing Iron and Steel's steel products have revenue from medium and thick plates. In 2012, Chongqing Iron and Steel's thick plate production ranked fifth in China, and medium plate production ranked 18th in China, with medium and thick plates as its main product. It is worth mentioning that Chongqing Iron and Steel is a shipbuilding steel production plant in China, and its environmental relocation project is also positioned as a shipbuilding steel production base, where thick plate products are mainly shipbuilding plates. For the medium and thick plate products mainly developed by Chongqing Iron and Steel, analysts say that medium and thick plates are mainly used in industries such as shipbuilding, machinery, and boilers. In the past two years, they have been mainly affected by the downturn in the shipbuilding market. Medium and thick plates have become the main steel varieties in China with a loss margin of *, and the operating rate of steel mills has also *. Last year, the average operating rate of domestic steel mills remained almost below 70%. Long process steel mills with blast furnaces cannot stop production, resulting in a loss of 200 to 300 yuan per ton of medium and thick plate (material). Even medium and thick plate steel mills with better cost control will still lose about 150 yuan per ton. It is expected that the prices of medium and thick plates will reach another level this year, and medium and thick plate steel mills will continue to face reshuffle. Another industry analyst bluntly stated that the competitiveness of steel mills in the southwest region is generally weak. "Even during the period before the 2008 financial crisis when the steel industry had good profits, steel mills in the southwest still suffered losses, and the overall profit level is not high." It is expected that Chongqing Steel's losses may continue for a long time. (Source: Lange Steel Network)