32 non-steel business listed steel companies

Right now, the entire steel industry is still in decline. Up to now, the measures taken by the State Council to defuse the overcapacity of steel mills have been carried out in succession, but the domestic steel market is still showing a trend of “shock and decline”. Since 2010, the steel industry has been deeply pressured by excess capacity to struggle on the P&L line. In the weak iron and steel market, many steel listed companies invariably chose to expand the “non-steel business” in order to seek new sources of profits. Domestic large iron and steel enterprises represented by Baosteel Co., Ltd., Wuhan Iron & Steel Co., Ltd. and Shagang Steel Co., Ltd. have set the development goals of the “12th Five-Year Plan” non-steel industry at more than 30% of the Group’s total revenue.

In addition to profit considerations, related assets formed in the non-steel business have also become one of the reasons for the diversification of steel companies. The immediate adjustment strategy of selling non-steel main industry-related assets helped Angang, Maanshan Iron and Steel, Valin Steel, and Shandong Iron & Steel successfully turn profit into profits in a short period of time.

Compared with the proportion of non-steel business of international large-scale steel companies, domestic steel companies still have a lot of room to expand new business. However, since the beginning of 2010, the State-owned Assets Supervision and Administration Commission of the State Council has proposed that “central enterprises should strengthen their main business and strictly control "Non-primary investment," experts said that the future of non-strategic investment in the steel industry may be subject to control.

Steel companies seek "way out"

According to the published 2013 performance statistics of listed steel companies, five steel companies, including Shougang and Jiuquan, will suffer varying degrees of losses, and other companies that are expected to make profits will also rely on asset sales and government subsidies to "turn losses into profits." Industry researchers said in an interview with the Times Weekly reporter: “The outlook for the steel industry is still not optimistic about 2014.”

In order to smoothly weather the harsh winter of the steel industry, many companies are leveraging the non-steel industry to seek a way out of the “diversified development” approach.

The 32 A-share steel plate companies have non-core business almost without exception. Most of the business types are concentrated in two types of minerals, logistics, machinery and equipment, import and export trade, and unclear financial services related to the steel industry. And real estate business.

Of the 32 listed steel companies, more than half of the companies operate non-steel industries such as logistics and transportation. Relying on the company's steel production, or using the advantages of the company's resources to match mineral development, more than a dozen steel companies including Wugang, Hualing, and Nangang have established modern logistics companies, port companies, and loading and unloading companies. In the basic functions of the auxiliary main business, the third-party business contributes profit at the same time.

In addition to being keen on operating logistics and transportation industries, listed steel companies are also an important aspect of their diversification efforts in the fields of financial services and real estate. The financial company affiliated to the Valin Group was first established in 2006 and currently carries out assets, liabilities and intermediate businesses. The real estate business emerged relatively early. Nanjing Sanjin Real Estate Development Co., Ltd., a subsidiary of Nanjing Iron & Steel, was incorporated in 1998 and has successfully developed a number of projects.

According to industry analysts, steel companies have plenty of early capital and it is a very common practice to use local advantages to invest in real estate. The financial services business that has emerged in the past decade seems to have little relevance to the main business of steel companies, but in fact it has the role of safeguarding the company's capital chain, supporting the Group’s other investments, and helping companies build the financial platform for future development.

Giants lead the diversity model

In the “Twelfth Five-Year Development Plan for the Iron and Steel Industry” formulated at the end of 2011, major steel companies have clearly pointed out the direction of development to the non-steel business. Baosteel, Wuhan Iron and Steel and Shagang have set the development target of the non-steel industry at more than 30% of the group's total revenue, and have spared no effort so far.

World Steel Dynamics released the 2013 world-class iron and steel enterprise competitiveness rankings, showing that there are 5 steel companies in China, namely Baosteel (11th), Shagang (22nd), Anshan Steel (28th), and Wuhan Iron and Steel Corporation. (30th) and Ma Gang (33rd).

Although the industry is in the doldrums, Baosteel has been able to stabilize its position as a big brother, and many of them have leveraged the "diversified and coordinated development" strategy. According to the information, this e-commerce platform of all the Shanghai Steel Exchange Centers of Baosteel had a trading volume of more than 2 million tons and 26,000 registered customers in the past year. In addition, 14 banks have completed the registration of the Shanghai Mobile Banking Assets and Pawning Information Platform. , And officially docking more than 50 certified warehouses; Baosight software is more than 100% market value in the capital market growth.

Earlier, Baosteel Co., Ltd.'s executive director said: “At the end of the 6-year plan period of Baosteel in 2018, the information industry and e-commerce business will account for 30% of Baosteel's parent company, not including the chemical and processing businesses related to steel smelting.”

The three-to-five-year reform plan announced by Shen Dongrong, the board of directors of Jiangsu Shagang Group in 2012, clearly put ambitions on Qianlong Logistics. He said: “To make a good contribution to the logistics of the steel industry and to be the first in the country. , The world's first. Five-year molding, ten years into the climate, to achieve (sales revenue) 200 billion yuan, to be able to have an international impact, so that we all know that Zhangjiagang, Jiangsu has Qianlong logistics."

Shagang is also a shareholder of Shanghai Jinpu**, Jiangsu Bank, Suzhou Bank, Inner Mongolia Bank, and Huatai Securities. Shen Wenrong once said in an interview: “After 5-10 years of hard work, the non-steel industry’s revenue will exceed that of the steel industry. This is Our future goals."

When an expert in the steel industry interviewed the Times Weekly, he explained that Shagang had difficulties in operating its logistics business and the results may not be as expected. "Comparatively, Baosteel's non-steel business is doing better."

Compared to the effectiveness and dexterity of the diversified mode switch of the two giants of steel, Wuhan Iron & Steel, which followed, was criticized for failing to test the water in non-core industries.

At the end of 2010, at the 19th Food Expo in Wuhan, Wuhan Iron & Steel displayed 38 kinds of wines and 29 kinds of olive oil, and announced that it entered the domestic food production and circulation field. At that time, the "Wugang Benfan" of Wugang Logistics Group had also become a profitable commodity on the Wuhan-Guangzhou high-speed railway.

As an iron and steel company with a sense of dexterity and leadership in the “non-steel business”, Wuhan Iron and Steel’s “diversification” program has gone deep into the three-dimensional ecological breeding of chickens, pigs and vegetables. At the end of last year, WISCO Logistics Group also focused on urban service industries and set up service centers to provide life services such as food delivery, pension counseling, travel platforms, convenient supermarkets, vehicle maintenance, property management, flower cultivation, and early education.

In the eyes of industry experts, "The development of diversified iron and steel industry business should still be along the company's industrial chain to expand, so as not to waste the company's own resources." While standing in the perspective of business operations, Chongqing Iron and Steel Board Secretary You Xiaoan told Times Weekly, " As long as companies think they have the ability to operate and do a good job, there is no need to limit them."

For such cross-business operations in state-owned enterprises, especially in central state-owned enterprises, Li Rongrong, director of the State-owned Assets Supervision and Administration Commission of the State Council, has emphasized many times since 2010 to strengthen the main business and strictly control non-primary investment.

From the perspective of the development path of Baosteel, Wuhan Iron and Anshan Iron and Steel Company in the past three years, the “bigger and stronger main business” has experienced and will continue to encounter industry bottlenecks for a period of time. Switching to the non-steel industry is a passive choice and a pull. Opportunity for the overall efficiency of the company. The SASAC's “strict control” spirit is beneficial to the resource allocation and utilization efficiency of the entire capitalist market. However, for individual companies, especially steel companies in the deep winter, stripping the non-steel industry indicates that it is difficult to “self-help”. .

In You Xiao'an's view, as long as the company can form a non-core business scale operation, so that the majority of shareholders to obtain benefits, it is a good thing, the so-called main business and vice-industry or the company should make the decision.

A number of people in the steel industry said that many other types of companies are also trying to diversify their development. In the short term, there will be room for the development of the non-steel industry of domestic steel companies, but there may be restrictions after the long-term development in the future.

Non-core assets become life-saving straw

When the leading steel companies attacked and expanded their non-core businesses, Anshan Iron and Steel and Maanshan Iron, both of which belonged to the “five-strong”, chose to sell their non-steel assets. By doing so, they achieved a turnaround from 2013 to 2009.

According to Anshan Steel's 2013 performance forecast released on January 21st, the company expects net profit attributable to shareholders of the listed company to reach 770 million yuan last year. The company's *ST Ansteel, which was crowned with a 4.125 billion yuan high loss in 2012, was finally able to remove the cap. , escaped the delisting crisis.

The practice of lowering costs and disposing of assets is not only of short duration but also of quick success. The sale of assets is also helpless. Industry experts admitted in the analysis: "The company is doing this to avoid risks and make the financial report a little better."

Chongqing Iron and Steel Tour Xiaoan told Times Weekly reporter: “If companies think that this part of non-steel assets is not very important to them, it can give up. The company’s own philosophy, the environment it faces, and the current situation make the company itself have the right to choose. Decisions that help the business in management must be understood."

Ma Gang said in a performance forecast recently disclosed that it expects its annual operating performance in 2013 to turn a profitable deficit compared to the same period of the previous year, achieving net profits attributable to the shareholders of the listed company of approximately RMB1.55 billion. The main reason for the profit forecast for the current period was that in 2013, the company carried out cost reduction and efficiency enhancement in all aspects, continued to deepen product structure adjustments, improved production and business conditions, and reduced operating losses. At the same time, in order to do a good job in the iron and steel industry, the company sold some of its non-steel core business-related assets and gained value-added assets.

For enterprises with serious losses, near-ST, or delisting, rather than investing in long-term development of other industries that can support earnings, it is better to temporarily abandon part of the low-end business, use assets for performance, solve immediate problems, and then turn to talk about long-term development. This move is not new in the steel industry. Valin Steel and Shandong Steel have also successfully achieved the urgent need to reverse the trend, improve performance and stabilize share prices by selling assets.

Non-steel assets can be used as a "retaining strategy" to not only play a profitable role during the stable period of the company's momentum, but also help enterprises respond to the trend of declining performance in large industries. As a life-saving straw, they can use their surplus value to avoid serious crises. However, according to expert analysis, from the perspective of long-term development, the company still needs careful consideration when it sells assets in one move.