[Trade trend] Due to high raw materials costs, Fangda increased revenue without profit in 2022

On the evening of March 7, Fangda Carbon (600516. SH) released a performance report, which showed that the company's operating revenue from January to December 2022 was 5.404 billion yuan, up 16.18% year on year; The net profit attributable to shareholders of listed companies was 894 million yuan, down 17.54% year-on-year. 

With regard to the performance of increasing income without increasing profits in 2022, Fangda Carbon explained that during the reporting period, under the pressure of the continuous rise of graphite electrode raw materials price and the insufficient electric furnace steel operating rate, the company adjusted its production and marketing structure, improved the efficiency of main and by-products, took multiple measures to expand income, and the business development trend was stable. 

In fact, compared with the first three quarters of 2022, the company's performance has improved. In the first three quarters of 2022, the company achieved a revenue of 3.925 billion yuan, a year-on-year increase of 9.98%, and a net profit attributable to the parent company of 467 million yuan, a year-on-year decrease of 46.56%.

According to public information, Fangda Carbon is mainly engaged in the research and development, production and sales of carbon products. The main products include graphite electrode, carbon brick products, isostatic graphite, new carbon materials, low-sulfur calcined petroleum coke, soft pitch, etc.

In the third quarter of 2022, the raw material prices rose and the company's profit margins continue to be compressed.

In the third quarter of 2022, both the supply and demand sides of graphite electrode were weak, and the industry losses further increased.

Specifically, in the third quarter of 2022, China's graphite output was 182,000 tons, down 29.73% year-on-year and 23.37% quarter-on-quarter, of which, the average operating rate of 85 electric furnace steel was 54.26%, down 16.46% year-on-year and 11.81% month-on-month.

The data shows that in the third quarter of 2022, graphite electrode average price was 22408.60 yuan/ton, with a month-on-month ratio of -9.32%, and the industry gross profit was 1731.67 yuan/ton, with a month-on-month ratio of -912.79 yuan/ton.

However, from the fourth quarter of 2022, graphite price has entered a downward channel, and it is expected that the cost pressure of Fangda carbon will be relieved. The data shows that the average price of high-end/low-end graphitization market in December 2022 has reached 16000/14000 yuan/ton, which is 14000/12000 yuan/ton lower than the peak in the second quarter of 2022.

In addition, Fangda Carbon pointed out in the investor survey on February 17, 2023 that since December 2022, 15 provinces and cities have issued documents to vigorously promote the transformation of steel production process from long process to short process, improve the level of scrap steel recycling, accelerate the construction of electric furnace projects and blast furnace adjustment. By 2023, graphite electrode's downstream market is anticipated to respond well, and the demand is expected to be higher than last year. Follow us for the latest report on the graphite electrode market.