Chinese rare earth producer Shenghe Resources Holding Co. posted a 71.69% year-on-year fall in first half’s net profit, due to rising costs and low prices for rare earth products.
Shenghe Resources registered a net profit of 7.46 million yuan ($1.21 million), or 0.0198 yuan per share in the first six months, the Chengdu-based company told Shanghai Stock Exchange yesterday.
Rare earth markets have remained lackluster through the first half, with prices slipping and consumption depressed, hurting the company’s profitability.
Although Shenghe Resources reported a 1383.07% surge in business revenue during the reporting period, its operating costs also jumped as it had purchased semi-products overseas at high prices. The company made provision for inventory devaluation due to an indication of impairment of rare earth products it had bought earlier.
Increasing bank loans and acquisition of new subsidiaries also incurred higher administration and financial costs, the company said.
Shenghe Resources expected its full-year net profit to be negatively affected should rare earth market remain anemic and rare earth metal prices continue to decline in the latter half. However, it added that rare earth market is on the mend with demand downstream picking up, and expressed confidence that China’s efforts in outdated capacity elimination and environmental protection will benefit rare earth industry.