Traditional sector companies benefit from reform drive

Benefiting from the country's ongoing supply-side reform, Chinese listed companies from traditional sectors are showing increased prosperity as they report positive fiscal results for 2017.

According to Shanghai-based financial information service provider Wind Info, more than half of the 3,467 companies listed on China's A-share market had provided their preliminary results as of Sunday. Of these, about 70 percent have announced good news－reporting profit increases or turnarounds. Companies from traditional industries－coal, steel, cement, chemical and papermaking－are seeing the most rapid increases.

A total of 20 public coal companies have announced their estimated performance for 2017 and 19 of them have reported positive results.

Coal products provider Shanxi Lu'An Environmental Energy Development said in its preliminary earnings estimate that the company's profit increase in 2017 can be largely attributed to the central government's policies, including supply-side reform and the industry's efforts to cut excessive capacity. As a result, coal prices continue to pick up and prices for the company's major products have risen significantly year-on-year.

The estimated performance report of Lu'An shows that the company's net profit in 2017 will come in at 2.1 billion yuan ($332 million), up 245 percent year-on-year.

A total of 19 steel companies have released estimated performance for 2017 and all of them have reported growth. Xinjiang Ba Yi Iron & Steel is expected to see its net profit surge the most significantly－by 30 times year-on-year.

The 12 A-share listed cement companies that have released their earnings estimates so far have all registered growth or turnaround. Anhui province-based industry leader Conch Cement expects a net profit growth rate of 70 percent to 90 percent.

Huang Peihao, head of equity capital markets Asia at UBS, said during the financial service provider's conference for 2018, held at the beginning of this month, that supply-side reform and deleveraging will be the two key topics for China's macroeconomic scenario this year.

"The country's economic restructuring will focus more on quality and the optimization of the economic structure," she said.

The chemical, papermaking and pesticide industries have been undergoing structural changes in response to the country's environmental protection policies. Public companies that have met with the country's environmental protection requirements have shown positive fiscal performance.

Shaanxi Xinghua Chemistry said in its earnings estimate that its net profit growth rate for 2017 will come in at around 662 percent. The company said in an announcement that the rapid growth is largely due to the decrease in the number of similar companies, a result of the stricter environmental protection policy announced in the fourth quarter last year.