Angang Steel Co., the biggest Hong Kong-listed Chinese steelmaker by value, said first-quarter profit more than doubled after prices increased, as demand rose and the government reined in capacity expansion.

Related readings: China to slash export rebates for products Steel output hits record in March Steel demand growth to slow down Angang Steel plans additional share offering

Net income was 2.4 billion yuan ($311 million), or 0.404 yuan a share, in the three months ended March 31, from restated 1.13 billion yuan, or 0.229 yuan a share a year earlier, the Anshan, Liaoning province-based company said in a statement to the Shenzhen stock exchange today, based on domestic accounting standards. Sales rose 32 percent to 16 billion yuan.

Steel prices in China, the world's top producer and consumer of the metal, recovered this year after the government tightened bank loans and land supply to rein in excess capacity growth. Prices gained 4.7 percent in the first three months of this year, according to the China Iron and Steel Association. Angang, China's third-biggest steelmaker, raised prices for April shipments last month, the Tex report said.

"We are optimistic on the outlook of Angang's performance this year on higher average steel prices," said Luo Wei, Shanghai-based analyst with China International Capital Corp., China's biggest investment bank.

Angang shares have more than doubled in the past year, falling 0.4 percent to close at HK$15.6 in Hong Kong on April 27. Its yuan-denominated A shares have tripled in the past 12 months in Shenzhen, falling 3.9 percent to 17.29 yuan on April 27.

China, supplier of one third of the world's steel, may boost production by 13 percent to 475 million tons this year, compared with an estimated 14 percent growth in demand, the China Iron and Steel Association said Feb. 9. Output grew 18 percent in 2006.

Angang plans to sell as many as 1.78 billion shares to existing holders in a three-for-10 rights offer to fund a 22.6 billion yuan steel mill, the company said April 11, without giving a price.

The share sale will result in an 8 percent dilution in earnings per share, HSBC Holdings Plc's analysts Daniel Kang and Sara Mak said in a report released last week. HSBC initiated its coverage on Angang with an "underweight" rating.

"While we remain positive on its long-term prospects, challenging headwinds lie ahead," the analysts said.

The new plant at Yingkou Port will increase production capacity 31 percent and drive profit growth, UBS AG's analyst Lance He said in a Feb. 8 note to clients. It will produce as many as 5 million tons of steel a year and 4.88 million tons of steel products, including heavy plates, used in shipbuilding and cars and cold-rolled sheets, used in appliances and cars.

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