(Yicai Global) May 27 -- Chinese industrial companies reported a year-on-year drop in profits last month, with car production hit particularly hard as the country took drastic steps to contain an upsurge in Covid-19.

Profits at industrial firms with an annual turnover of at least CNY20 million (USD3.14 million) fell 8.5 percent in April, figures from the National Bureau of Statistics showed today.

Manufacturers' profits slumped 22.4 percent as Covid-19 broadsided the automobile industry, which contributed 6.7 percentage points to the decline in manufacturing sector earnings. Profits at power, heating, gas, and water companies plunged 26.8 percent.

Industrial firms will gradually recover with the orderly resumption of production and policies to further ease the pressure on market players, said senior NBS statistician Zhu Hong.

But industrial demand still faces constraints as the pick-up in consumption is weak and the outlook for the property market has not been significantly reversed, said Wu Chaoming, vice president of the Caixin Research Institute.

The middle and lower reaches of industry, especially micro, small, and mid-sized companies, are facing the dual pressures of slow demand and surging costs with operational difficulties still severe,  he noted. That impinges on any improvement in earnings at industrial enterprises, Wu added.

Mining sector profits soared 1.4 times, maintaining relatively fast growth. Zhu said the effect of the nation’s energy supply guarantee policy continued to show in April, and the output of energy products including coal increased rapidly, while commodities prices stayed high, driving the rapid growth of upstream industry profits.

In the first four months of the year, profits at industrial enterprises totaled CNY2.66 trillion (USD400 billion), up 3.5 percent from a year earlier, but 5 percentage points below the increase reported for the first quarter

Profits at companies in regions and industries badly affected by the Covid-19 wave declined at a steeper rate. From January to April, earnings in eastern and northeastern China fell 16.1 percent and 8.1 percent, respectively, trimming the overall profit rate by 4.2 points compared with that of the first quarter.

Profits in the alcohol, beverage, tea, food production, and tobacco industries rose 20.9 percent, 10.8 percent, and 7.9 percent, respectively, in the four months from a year earlier.

Since the beginning of the year, the supply of basic consumer goods has been sufficient and demand has been stable, ensuring stable growth in profits at firms that make such items, Zhu said.

Editor: Futura Costaglione