Angang Steel to sell loss-making plants to parent Anshan
Parent company agrees to pay premium for mainland plant to help struggling offshoot
Angang Steel has agreed to sell two loss-making steel plants to its parent in exchange for cash and a profitable trading business, the second move in a week aimed at shoring up its bottom line hurt by weak demand growth and industrywide overcapacity.
The connected transactions, combined with a change in depreciation policy that would add 900 million yuan (HK$1.11 billion) to its net profit next year, will help it avoid posting a third consecutive year of net loss and ease the risk of a mainland delisting.
The steelmaker clinched a deal to sell a 45 per cent stake in Tianjin Tiantie to Anshan Iron and Steel Group for 1.18 billion yuan, Angang said in a statement. The valuation at which Tianjin Tiantie was sold was on par with its net asset value as appraised by an independent valuer.
Given Angang is only worth 0.6 times its net asset value in the stock market, the parent is paying a premium for Tianjin Tiantie. As a result of the transaction, Angang will make a one-time disposal gain of 175.8 million yuan.
"It is obviously a move by the parent to help struggling Angang," an analyst working for an Asian brokerage said.
Angang posted a net loss of 2.16 billion yuan last year, and may record a loss of 2.4 billion yuan based on the average estimate of 30 analysts polled by Thomson Reuters. It posted a net loss of 3.17 billion yuan for the year's first nine months.
