Net Profit Plummets 57.7% on Collapsing Margins
Shougang Resources (00639.HK) announced a significant deterioration in its financial performance for the fiscal year 2025. The company's net profit plummeted by 57.7% year-over-year to RMB 632 million. This steep decline occurred even as annual revenue remained relatively stable, falling just 1.6% to RMB 5.056 billion.
The core of the issue lies in sharply contracting profitability. Gross profit collapsed by 59.1% to RMB 1.084 billion, revealing that the cost of operations consumed a much larger portion of revenue than in the previous year. The resulting earnings per share (EPS) for the period was RMB 0.1242.
Shares Fall 6.7% as 97% Dividend Payout Is Questioned
In response to the weak earnings report, investors pushed shares of Shougang Resources down 6.7% on March 26. The sell-off reflected concerns not only about the profit decline but also about the company's capital allocation strategy. Despite the earnings collapse, Shougang declared a final dividend of RMB 0.06, which, when combined with the interim dividend, brings the total for the year to RMB 0.12.
This dividend level equates to a payout ratio of 97%, meaning the company is returning nearly all of its net profit to shareholders. While attractive on the surface, such a high ratio during a period of financial weakness raises questions about the dividend's sustainability and signals a lack of internal reinvestment for future growth. The negative sentiment was also reflected in derivatives markets, where short-selling activity accounted for 4.44% of turnover, totaling $2.98 million.