Soybeans up in the first half of the year, COFCO profit down

Introduction: soaring soybean prices eat into COFCO's profits in Beijing July 29: China's COFCO may announce a profit cut of up to a third in the first half of this year as soybean prices rose and oil demand weakened in the first half of this year, while the Chinese government took tough measures to curb the overheating economy BNP Paribas expects COFCO's net profit to fall 30% year-on-year in the first half of the year, while Deutsche Bank expects COFCO's net profit to fall 35% year-on-year due to losses in May and June Analysts also expect COFCO to fail to meet its earnings growth forecast of 12% this year COFCO's net profit in the first half of last year was HK $195 million COFCO will announce its profit forecast for this year next month Simon Cheng, an analyst at BNP Paribas Securities, said in a report that the prices of soybeans and their manufactured products are currently moving in the opposite direction because of weak domestic demand for soybeans manufactured products, which is also related to the control measures taken by the central government COFCO's profits are affected by soybean prices, and edible oil, soybean oil and related products are its main profitable commodities, which accounted for more than half of the total profits last year COFCO's other sources of revenue include wine, candy, trade and milling The price of imported soybeans is almost 50% higher than the previous year's average due to strong expectations of soybean demand in China, which has prompted speculators to participate in the soybean market In the past few months, China has rejected more than 250000 tons of Brazilian soybeans on the grounds that the contaminated soybeans exceeded the permitted level Carlo lovatelli, President of Brazil's oilseed Industry Association, earlier accused China of using this as a reason to lower the original contract price of high priced soybean orders COFCO mainly imports soybeans from the United States, accounting for 80% of the total imports Analysts say COFCO is unlikely to shift rising costs to consumers as it did last year because domestic soybean meal demand has been sluggish Analysts at the industrial and Commercial East Asia financial holding company (ICEA) said the increase in soybean meal prices further curbed sales, forcing farmers to use soybean meal substitutes to feed poultry According to analysts who participated in the 2004 China summer grain and oil and feed market forum, the edible oil press industry suffered losses in May and June BNP Paribas said it had identified a decline in profits in China's edible oil industry, particularly during the second quarter The brokerage expects COFCO's gross margin on cooking oil to fall to 4.3% this year, compared with 5.9% last year, resulting in a 28% drop in COFCO's stock target price to HK $3.40