Recently, Yatai Group issued a performance forecast for 2024, saying that the annual net profit attributable to the owner of the parent company is expected to be-28 to-3.2 billion yuan. According to the calculation of Yatai Group's net profit of 1.29 billion yuan in the third quarter, the company's loss in the fourth quarter was 1.5-1.9 billion yuan, while many enterprises in the same industry turned losses into profits in the fourth quarter, with obvious differences. As one of the giants in the cement industry in Northeast China, why does Yatai Group continue to fall behind and still suffer huge losses in its business performance?
Yatai Group is one of the important participants in the Northeast cement market. By the end of 2024, the company has 10.075 million tons of clinker production capacity in Jilin, accounting for 44.1%, and has an absolute dominant position. Liaoning and Heilongjiang have clinker production capacity of 5.89 million tons and 2.325 million tons respectively, ranking fifth and second echelons respectively. As the largest business of Yatai Group, the cement building materials sector accounts for about 40% of the company's business income in recent years. In 2022, the cement industry suddenly turned cold, and the company's cement business suffered a loss. In 2023, the competition was fierce, the price of cement in Northeast China went down all the way, and the loss of the company's cement business expanded to 1.95 billion yuan. In the first half of 2024, the loss of the company's cement business was reduced to 340 million yuan due to the increase of industry self-discipline awareness and synchronous peak staggering, and the rise of cement prices; In the second half of the year, the Northeast market continued to improve, the volume and price of cement of the Company increased simultaneously, and the operating conditions improved to a certain extent. Due to the decline in market demand, the loss in the first half of the year could not be covered. It is expected that the cement business of the Company will continue to suffer losses throughout the year, but the loss will be significantly reduced.
Figure 1: Profit
of Yatai Group's cement business in recent years Data source: Cement Big Data (https://data.ccement.com/)
Poor pharmaceutical business has little
impact on profits Pharmaceutical business is the second largest business of Yatai Group, accounting for about 24% of its revenue in 2023, covering modern Chinese medicine, Chinese herbal pieces, chemicals, biological products, medical devices and health food. Jilin Pharmacy is the main driving carrier of the company's pharmaceutical business, mainly engaged in pharmaceutical retail. In recent years, its revenue accounted for more than 70% of the revenue of the pharmaceutical sector. In 2022, there was a loss. In the first half of 2024, the loss reached 17.24 million yuan. It is expected that it will be more difficult to turn around the loss in the year. While other pharmaceutical businesses are profitable, margins are thin. On the whole, the company's pharmaceutical sector is on the edge of profit and loss, with little profit contribution and little impact.
Figure 2: The business of the large pharmacy in Jilin recorded a loss
Data source: Cement Big Data (https://data.ccement.com/)
The real estate sector was weak and the asset impairment was relatively large
. Real estate business is the third largest business of Yatai Group, although the proportion of revenue is not high, it has the greatest impact on the company's profits. In 2024, the state issued a number of policies to urge real estate to stop falling and stabilize, but it still takes time to stabilize. At present, it is still in the stage of deep adjustment, and the company's real estate business continues to bear pressure. In the first half of the year, Jilin Yatai Real Estate Development Co., Ltd., the company's main wholly-owned subsidiary, lost 230 million yuan, and Lanhai Quanzhou Shuicheng (Tianjin) Development Co., Ltd., the holding subsidiary, lost 180 million yuan.
Table 1: Net profit of major real estate companies (100 million yuan)
Data source: Cement Big Data (https://data.ccement.com/)
According to the usual practice in previous years, Yatai Group will calculate the loss of assets in the fourth quarter of the year. It mainly involves real estate subsidiaries, which has a greater impact on their profits. Yatai Group's asset impairment losses mainly include bad debt losses, inventory depreciation losses, goodwill impairment losses and so on. According to the data, in 2023, real estate projects showed signs of impairment, with a provision of 470 million yuan for depreciation, exceeding 370 million yuan for three consecutive years; Lanhai Quanzhou Shuicheng (Tianjin) Development Co., Ltd. did not recover about 5 billion yuan of funds receivable from Tianjin Wuqing District Land Consolidation Center, resulting in more than 900 million yuan of goodwill impairment and asset impairment. Up to now, the problem of fund recovery of land projects in Tianjin has not been properly handled, and the impairment of real estate projects under the deep adjustment of the real estate industry is superimposed. The author predicts that the amount of asset impairment loss of the company's real estate business in the fourth quarter of 2024 is still large, which is the main reason for Yatai Group's sustained huge losses.
Figure 3: Yatai Group's asset impairment losses continue to expand
Data source: Cement Big Data (https://data.ccement.com/)
Focus on core business, prudent and diversified operation
In addition to building materials business, pharmaceutical business and real estate business, Yatai Group is also involved in financial investment (equity participation in Northeast Securities, Jilin Bank, etc.), coal mining and sales, commercial and trade industries and other sectors. In the past two years, in addition to financial investment contributing more than 300 million yuan of profits annually, the coal industry and commercial and trade industries have low profits and even losses. The author believes that the company should combine its own reality, foster strengths and circumvent weaknesses, focus on the main business, build core competitiveness, carefully diversify, avoid excessive occupation of resources due to the long front, so as to get out of the quagmire of sustained losses. (This article does not constitute investment advice)
