Delong Holdings: Required to shut down blast furnace in China, denting revenue

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Delong Holdings said on Thursday that it will be required to shut down a blast furnace on Friday as part of autumn and winter air pollution policies in China’s Xingtai City.

The production hiatus will continue through 31 March 2019, with the possibility that further production cuts could be required in the event of any heavy pollution warnings, it said in a filing to SGX after the market close on Thursday.

“According to the current Beijing-Tianjin-Hebei air quality forecast, the winter’s environmental protection measures will gradually become more stringent, which in turn, is expected to have an impact on the company’s operations,” Delong said.

The shutdown of the blast furnace was expected to reduce production capacity by around 89,000 tonnes for 2018 and by 250,000 tonnes for 2019, representing 2.3 percent and 7.4 percent of those years’ estimated capacity, respectively, it said.

Delong’s revenue is expected to be 316 million yuan lower in 2018 and 887 million yuan lower in 2019, based on the average selling price of hot-rolled coil for the nine months ended 30 September, the filing said.

For the third quarter, Delong reported earlier this month net profit of 521.79 million yuan on sales of 3.95 billion yuan.

The furnace is held by Delong Holdings’ indirect wholly owned subsidiary, Delong Steel, it said.

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