Wuhan Iron and Steel H1 profits nearly double on rising sales

Wuhan Iron and Steel Company Ltd., the listed subsidiary of China's third largest steel maker, said Sunday that its net profit rose 90.43 percent year on year to 963.53 million yuan (141.7 million U.S. dollars) during the first half of the year as strong economic growth boosted steel demand and prices.

The company's first-half-year sales reached 34.36 billion yuan, up 50.72 percent from one year earlier, it said in a statement delivered to the Shanghai Stock Exchange.

However, costs also climbed in the first six months compared with a year earlier because of increases in raw material prices, it said.

Production costs for steel products gained 47.12 percent year on year to 31.18 billion yuan. Further, the company's steel output in the first half of the year gained 29.75 percent year on year to 8.04 million tonnes.

China's producer price index, a major gauge of inflation at the wholesale level, rose 6 percent in the January-June period, according to statistics released by the National Bureau of Statistics.

However, the company was likely to face a "difficult time" in the second half of 2010 and meeting its full-year profit target would become a "challenging task" as demand from auto, home appliance and real estate sectors experienced "drastic changes" since July, leading to more restrained sales and falling prices, it said.

Company officials also worried that high prices of iron ore, coal and electricity would further push up production costs and squeeze profit margins.

On Friday, the price of its shares fell 2.87 percent to 4.73 yuan on the Shanghai bourse.