CRRC’s profits fall as edge wanes

Major Chinese rolling stock maker CRRC Corp faces challenges in global markets as its price edge wanes, a company executive said.

Foreign orders in 2017 fell 40 percent short of the annual target, coming it at just $5.7 billion, Beijing-based financial news site cb.com.cn reported on Thursday, citing Vice President Lou Qiliang.

From 2011 to 2017, CRRC lost bids for some projects for price reasons. Its prices were affected by interest-rate differentials, surging raw materials prices, and rising costs for the installation of components, cb.com.cn said.

Meanwhile, China has become less competitive in terms of the cost of financing. For instance, average interest rates for financing in some Western developed countries are 0.5 percent to 1.8 percent, but rates in China remain between 3.5 percent and 4 percent, Lou said. The difference in interest rates offsets the company’s price edges.

CRRC, listed at the Shanghai Stock Exchange, said revenue fell 8.14 percent in 2017 to 211.01 billion yuan ($33.56 billion), said its annual financial report on Thursday. Net profit dropped 4.35 percent to 10.8 billion yuan.

An industry insider, who declined to be identified, told the Global Times on Thursday that fluctuations are common in overseas markets for rail equipment.

A mix of factors, rather than foreign exchange alone, determines the size of the order book.

“The overseas market is cyclical. For example, 2015 was a low, while 2016 was a high... 2017 was a low, so 2018 will be a high,” the person said.

Lou called for asset restructuring and improved technologies, quality and management to encounter challenges overseas.

CRRC will soon launch a targeted study on markets in North America and Europe for potential acquisitions, the report said.