Chinese companies at a glance

Big tobacco merger

Two Chinese tobacco companies are merging to form the world's fourth-largest cigarette producer by volume, a financial newspaper reported last week.

Hongyun Group and Honghe Group signed a letter of intent last Monday, the 21st Century Business Herald said, citing Li Weidong, an executive of their parent company, China Tobacco Yunnan Industrial Corp. It said the deal requires approval from China's State Tobacco Monopoly Administration.

The merged company will be named Hongyun Honghe Tobacco Group Co Ltd and have plants in Yunnan and Xinjiang Uygur autonomous region, both tobacco-growing areas, the newspaper said.

The two companies, both located in the southwestern province of Yunnan, produced 4.6 million cases of cigarettes last year. A case in China's tobacco industry is 50,000 cigarettes, making that equal to 230 billion cigarettes.

That would make the new company the world's fourth-largest producer after Philip Morris International Inc, British American Tobacco PLC and Japan Tobacco Inc.

Steel price cuts

Baoshan Iron & Steel (Baosteel), the country's largest listed steel mill, announced it will lower most of its steel product prices in October after it raised prices for three consecutive quarters this year.

This may be the result of weakened downstream demand and a new round of economic adjustment, analysts said.

Baosteel announced last Monday that it will slash the price of its cold-rolled steel products by 300 yuan per ton from the fourth quarter. The price-cut list also includes galvanized sheet products, which will go down 100 yuan per ton, hot-rolled pickled steel products, which will drop 300 yuan per ton, and galvanized fingerprint resistant sheet, which will dip 400 yuan per ton.

However, the prices of hot-rolled plate and silicon steel will stay unchanged. Products such as shipbuilding plate will be raised by 300 yuan per ton.

Tsingtao profit up

Tsingtao Brewery Co Ltd recently reported first-half net profits rising 32.39 percent year-on-year to 381.13 million yuan due to higher prices.

It adds that growth receives a boost from a lower year-earlier profit after a restatement to account for higher taxes.

In its interim report filed with the Shanghai Stock Exchange, the company says it has sold 2.69 million kiloliters of beer in the first six months, up only 5 percent from a year earlier, roughly in line with the industry total for China, which rose 5.6 percent year-on-year to 19.65 million kiloliters.

The national total slowsed from the growth rate of 16.2 percent from the previous year.

However, the company moderated the impact of slower growth by adjustments to prices and the product mix.

Chinalco gets Rio stake nod

Aluminum Corp of China, or Chinalco, received Australian approval last week to raise its stake in Rio Tinto Group to 11 percent, the target of a hostile $143 billion takeover by rival miner BHP Billiton Ltd.

"I have decided to raise no objections under Australia's foreign investment policy," says Wayne Swan, Federal Treasurer of Australia.

Chinalco, in partnership with Alcoa Inc, bought a 9-percent stake in London-based Rio in February and said in March it may seek to increase that holding, according to Bloomberg News.

The bid by China's biggest aluminum producer may make it more difficult for Melbourne-based BHP to succeed in its all-stock takeover offer for Rio, the world's third-largest mining company. Chinalco may be seeking to increase its stake to block that deal, the Australian Financial Review reported.

Ningbo Bird continues plunge

Ningbo Bird Co, once the No 1 Chinese-brand handset maker, continues to suffer on the profit front as a result of stronger competition.

The company reported last week that it lost 22.08 million yuan in the first half in a market that Nokia, Samsung and Chinese manufacturers now dominate.

The Shanghai-listed phone maker has begun shutting down subsidiaries to cut costs and improve profitability, but it is still expected to lose money in the third quarter, Bird said in a statement to the Shanghai Stock Exchange.

Despite the bad news, the loss narrowed in the period, after a sale of the company's stake in a joint venture. The company lost 592 million yuan in the same period last year.

From January to June, the manufacturer generated 1.29 billion yuan in revenue, 39 percent less than a year ago. Domestic handset revenue amounted to 600 million yuan, 33 percent lower. Bird's overseas phone sales were 660 million yuan, a 44-percent decrease.

(China Daily 09/01/2008 page7)