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China's rail firms post shrinking profits after drops in rail investment

(Xinhua)

13:49, August 26, 2011

BEIJING, Aug. 25 (Xinhua) -- Many Chinese companies in railway-related industries posted shrinking first-half profits due to waning investment in the country's railway sector.

Of the 28 rail-related listed companies which have released their mid-year reports, seven firms reported sliding profits while many others in railway-related business sectors suffered downturns, according to Wind Information, a Shanghai-based financial data provider.

China Railway Erju Co. Ltd., a leading railway construction enterprise, reported net profits of 395.57 million yuan (61.91 million U.S. dollars) in the first half of the year, a 12.24 percent drop year-on-year.

Guosen Securities analyst Qiu Bo has a pessimistic outlook on the sector and expects the country's railway investment to remain weak through the next few years.

According to statistics from the Ministry of Railways (MOR), growth in the country's railway fixed-asset investment has been on the decline, from a 25.6-percent year-on-year increase in January to a 21.8-percent year-on-year decline in July.

Earlier this month, the Chinese government ordered a temporary halt on approving new railway lines and urged a thorough overhaul of the country's high-speed railways following a train collision in July that killed 40 people and sparked public safety concerns.

Analysts also warned of an emerging debt problem in railway-related industries as the MOR, a major buyer in China, faces a cash flow shortage as well as rising financing costs, thus prolonging its payment to enterprises.

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