Falling costs lift machinery firms

First half profits increase 19.6% on stronger economy, lower prices

The machinery industry's first-half profits jumped 19.6 percent year-on-year to 715.3 billion yuan ($115.8 billion) as the economy improved, costs fell and companies upgraded their products, the

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The growth rate was 7 percentage points higher than a year earlier.

Chen Bin, executive vice-president of the federation, forecast that industry profits will grow 15 percent this year.

He said machinery products connected with consumption and environmental protection - industries that the government is encouraging - had strong output growth. Those items included wind power facilities, combustion engines and environmental protection equipment.

"Products related to the real estate, steel and coal industries still encountered gloomy market conditions," Chen said.

But tough times in the coal industry helped as well. Energy costs and raw material costs were subdued in the first six months, which helped manufacturers' bottom lines, he said.

For example, coal price was 500 yuan a metric ton in late July, down 140 yuan from Jan 1, according to figures from Qinhuangdao port in Hebei province, a major coal port in northern China.

Cai Weici, vice-chairman of the machinery federation, said that beyond lower costs, companies' restructuring and product upgrading were major drivers in their profit growth.

"Many machinery manufacturers have upgraded their products in response to market demand, which helped them achieve better performances in terms of revenue and profit," said Cai. "China's machinery exports are shifting to high-end products, too."

Exports stood at $191.7 billion in the first half, up 7.2 percent year-on-year. The growth rate was 6 percentage points higher than in the same period last year, according to the federation.

Machinery imports totaled $155.9 billion for the first half, up 11 percent year-on-year.

Chen forecast 8 percent growth in exports for the whole year.

"The broad economy is warming up, which will provide a better market for the machinery industry in the second half. Many domestic companies are shifting their focus to innovation of high-end products and services, which will contribute to stable export growth," he said.

The industry's first-half revenue rose 11.5 percent to 10.4 trillion yuan. Chen forecast revenues will grow 12 percent for the whole year.