China Nonferrous Group profit decline

Recently, the financial report released by China National Chest Co., Ltd. shows that in the first quarter of this year, the company's net profit increased from 21.59 million yuan in the same period last year to 25.8 million yuan, an increase of nearly 20%. However, the data also shows that the company's government subsidies for the same period up to 29.21 million yuan.

Since 2011, the performance of China National Color Co., Ltd. has been declining year by year, of which, last year's net profit fell to 81.85 million yuan, a decrease of nearly 60% over the same period in 2012.

The change in the financial figures of China National Color Co., Ltd. reflects the actual operation of major shareholder China Nonferrous Metals Mining Group Co., Ltd. (hereinafter referred to as “China Nonferrous Metals Group”).

On May 26, CNMC released its updated 2013 financial report. The company's operating income for the past year was 19.009 billion yuan, an increase of 37.764 billion yuan over 2012. However, its operating profit and total profit decreased by 966 million yuan and 1.136 billion yuan respectively from 2012, and the net profit attributable to owners of the parent company reached 417 million yuan.

According to the announcement, China Nonferrous Group had disclosed its financial report on April 25th, but afterwards the audit found that “the actual amount of the letter of credit payment and financial product investment and pledge** was due to the subsidiary China Daye Nonferrous Metals Mining Co., Ltd. Reclassifications affect the changes in the items in the cash flow statement, resulting in simultaneous changes in China Nonferrous Group's consolidated cash flow statement for each item last year."

Specifically, this event ultimately reduced the net cash flow from operating activities by approximately 544 million yuan, the net cash flow from investment activities decreased by 4.949 billion yuan, and the net cash flow from financing activities increased by 5.493 billion yuan.

Consistent with the performance of China's color stocks, China Nonferrous Metals Group's net profit has also continued to decline in the past two years: 2011 net profit of 690 million yuan, fell to 525 million yuan in 2012, to turn losses from last year's profits.

After nearly 30 years of development, this ultra-large nonferrous metal group has gradually developed from a single international project contracting to develop three major industries of non-ferrous metal resources development, construction engineering, and machinery manufacturing. At present, the company has three listed companies, namely Zhongcai Co., Ltd., Dongfang Shuye and China Nonferrous Metals Mining.

Zhongxue has said that last year, the domestic non-ferrous metals industry prices continued to fluctuate at a low level. The profits of mining enterprises have dropped sharply. The smelting industry has suffered large losses. The equipment manufacturing sector still has not achieved overall profitability. Although the project contracting business is gradually coming out of the low point, The company's operations still face greater challenges.

With regard to the specific business of China National Semiconductor, except for the significant year-on-year increase in its engineering contracting business, the nonferrous metal resources business and equipment manufacturing business have declined to varying degrees. Due to low demand and excess production capacity, the company's non-ferrous metal resources business realized gross profit of 634 million yuan. , a decrease of 19.28% over the same period of last year.

Not only is the China National Color Co., Ltd., but also the performance of the other two listed companies of CNMC is dismal.

Among them, due to the sluggish demand of the leading industries of silicon meal and silk reeling, the new industries are affected by the overcapacity of the industry. Both the leading industry and the new industry face the decline of the market, the falling volume and price, the rising costs, and the intensified competition. The situation ultimately led to last year's net profit of only 3.541 million yuan, compared with 2012 performance over 96%. The profit of China Nonferrous Mining, which is dominated by copper, also dropped by over 30% year-on-year.

The favorable news for China Nonferrous Metals Group is that in 2014, the global economic recovery trend was obvious, and China’s macroeconomic external environment has improved, which will have a positive impact on the domestic non-ferrous metals market.

However, in the new year, how to properly resolve the increase in annual accounts receivable will also test the wisdom of China Nonferrous Metals Group.

According to statistics, China Nonferrous Metals Group's accounts receivable amounted to 6.532 billion yuan at the end of 2011, and it soared to 8.86 billion yuan by the end of 2013, an increase of 2.335 billion yuan in two years.

Among accounts receivables last year, only account receivables with single significant amounts and single provision for bad debts were taken as an example. The book balance at the end of the period was RMB 422 million, and the provision for bad debts was RMB 117 million, of which, Chaozhou Fluorescent Materials Factory and other accounts were accrued. The highest amount was more than 54 million. It also included more than a dozen companies such as Iranian National Copper Company, Henan Erjian, Shenyang Dongfang Copper Industry Co., Ltd., etc. It also made 100% accruals because it was expected that the recovery was small.

There are as many as dozens of companies that do business with China Nonferrous Metals Group. These large and small companies belong to different industries such as non-ferrous metals, chemicals, building materials, and paper, and their actual operations directly affect this non-ferrous group.

China Nonferrous Group made it clear in its announcement that in 2013, seven companies including Jincheng Paper Co., Ltd. and other companies accounted for approximately 9.93 million in accounts receivable, because the company was revoked licenses or units were cancelled, resulting in these accounts can not be recovered.

It is worth noting that the above accounts do not include the other accounts receivable that the company has individually provided for bad debts. This part of the accounts involved 79.996 million yuan for 17 large and small enterprises.