HONG KONG: China Nickel Resources Holdings, an integrated steel and mineral producer on the mainland, posted a 90 percent slump in its net earnings last year, weighed by a steep drop in steel demand and prices late last year amid a global downturn.

Chairman and Chief Executive Officer Dong Shutong told a news briefing in Hong Kong yesterday that 2008 earnings fell to 37.36 million yuan, while revenue also skidded 21 percent to 1.48 billion yuan.

Gross profit tumbled 74 percent year-on-year to 152 million yuan, while the gross profit margin slipped 21 percentage points to 10 percent.

"2008 was a very challenging year. The global financial crisis, as well as raw material and fuel prices, hit hard the heavy and manufacturing industries," Dong said.

Due to a slump in market demand for steel in the fourth quarter, China Nickel Resources wrote down 103 million yuan worth of inventories last year.

Dong said the company does not expect to make a similar provision this year.

The average price of nickel slumped to 80,000 yuan per ton in the fourth quarter last year, but it has since rebounded to around 125,000 yuan per ton, after the central government launched last November a package of economic stimulus measures.

In spite of the recovery of the commodity's price, the company's current production capacity hovers at only about 70 percent after a steep fall in production in the fourth quarter.

"It is impossible to return to 100 percent production before the third quarter this year," he said.

"However, the production volume this year will not be less than that of last year's level," he said.Stainless steel-based products remained the company's principal revenue driver, contributing 1.21 billion yuan, or 82 percent, of total revenue last year. Sales volume of stainless base materials also accounted for 79 percent of the total sales volume, reaching 158,475 tons.

The company added Nickel-Chromium (Ni-Cr) alloy steel ingots, Ni-Cr bearing steel and other new products into its product portfolio last year. Revenue from sales of Ni-Cr alloy steel ingots amounted to 152 million yuan, representing 10 percent of the company's total revenue.

China Nickel Resources raised HK$2.65 billion from its share and convertible bond subscription as well as the issue of convertible bonds in 2007.

Proceeds of the fund-raising exercises have been deployed to sustain the company's new ores exploration on the mainland and steel mill expansion in Indonesia and the mainland.

Against a 3.77 percent jump in the benchmark Hang Seng Index yesterday, shares in China Nickel Resources yesterday slipped modestly 0.97 percent, or HK$0.01, to close at HK$1.02.

(HK Edition 05/01/2009 page2)