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Anyang Iron & Steel (600569), which continues to suffer losses, has once again "asked for help" from its controlling shareholder. On August 13, Anyang Iron & Steel said that it plans to borrow RMB 80 million from its controlling shareholder, Anyang Iron & Steel Group Co., Ltd. (hereinafter referred to as "Angang Group"), with a term of one year, which can be extended by negotiation for one year upon expiration, and the maximum term shall not exceed three years from the date of the loan.

Second time this year

It is understood that as of March 31, 2024, Angang Group holds 66.78% of Anyang Iron and Steel's shares and is the company's controlling shareholder. According to the "Shanghai Stock Exchange Listing Rules", Angang Group is a related party of the company, and this transaction constitutes a related transaction.

Anyang Iron and Steel stated that the company's related-party transaction is used to improve the company's financing structure and supplement working capital. It will not affect the normal operation of the company's business and has no impact on the company's independence. The company's main business will not become dependent on related parties due to this transaction.

Beijing Business Daily reporter noted that this is the second time that Anyang Iron and Steel has borrowed money from its controlling shareholder this year. In April this year, Anyang Iron and Steel also announced that it would borrow no more than 600 million yuan from Angang Group for a period of no more than 3 years (2+1 years). At that time, Anyang Iron and Steel also stated that the company's related-party transaction was used to improve the company's financing structure and supplement working capital.

Yuan Shuai, executive director of the project to promote high-quality development of specialized, sophisticated and innovative enterprises, told Beijing Business Daily that a company's continuous borrowing from its controlling shareholder usually reflects the company's current tight cash flow and urgent financing needs. Although borrowing from controlling shareholders can alleviate the company's financial pressure to a certain extent, it may also cause market concerns about the company's financial stability and sustainable operating capabilities.

Huge losses for two consecutive years

Anyang Iron and Steel, which has borrowed money from its controlling shareholder twice, has suffered huge losses in net profits for two consecutive years.

The financial report shows that from 2021 to 2023, Anyang Iron and Steel achieved attributable net profits of approximately 964 million yuan, -3.001 billion yuan, and -1.554 billion yuan, respectively. It is not difficult to see that the company's net profit turned sharply to loss in 2022 and continued to lose money in 2023. According to the performance forecast disclosed by Anyang Iron and Steel, the company expects to achieve an attributable net profit of about -1.26 billion yuan in the first half of 2024. In addition, Anyang Iron and Steel's asset-liability ratio is also high, with an asset-liability ratio of 82.98% in 2023.

Anyang Iron and Steel said that in the first half of 2024, the contradiction between supply and demand in the steel industry was prominent, steel prices continued to decline, and the prices of raw materials such as iron ore were prone to rise but difficult to fall, resulting in a significant decline in corporate profits. The industry showed an operating situation of high output, high cost, high inventory, low demand, low price and low efficiency. Faced with the downward pressure of the market, although the company coordinated the promotion of key tasks such as cost reduction, structural adjustment, efficiency increase and risk control, the company's special steel transformation was in a period of climbing and crossing the hurdle due to the weakening market demand, and the operating performance in the reporting period was in the red.

Regarding the market trend of the steel industry, Yuan Shuai also said that as a cyclical industry, the trend of the steel industry is often closely related to the overall economic situation. The steel industry is expected to still face certain challenges in the second half of the year, demand growth may slow down, and prices may be under pressure. However, with the gradual implementation of the country's economic stabilization policies and the rapid development of emerging industries, the steel industry may also usher in new growth points, especially in the fields of high-end manufacturing and new energy. Demand is expected to increase.

While the performance is not ideal, Anyang Iron and Steel's stock price has continued to fall in recent years. On July 19, Anyang Iron and Steel became a "one-yuan stock". As of the close of August 14, Anyang Iron and Steel closed down 0.7%, with a share price of 1.42 yuan per share. According to the relevant provisions of the "Stock Listing Rules", if the closing price of a listed company issuing A shares is less than RMB 1 for 20 consecutive trading days, the company's stock may be delisted. In addition, if the listing is terminated due to the triggering of a trading-related mandatory delisting situation, the company's stock will not enter the delisting consolidation period.

Regarding the relevant issues, a Beijing Business Daily reporter sent an interview letter to Anyang Iron and Steel, but no reply was received as of press time.

Beijing Business Daily reporter Ma Huanhuan and Ran Lili