In 2011, the comprehensive gross margin of Daye Special Steel dropped 1.83 percentage points on a year-on –year base to 8.41%. The drop of gross margin led to the company’s profit decrease to some extent. In 2011, the stringent regulation of real estate in China seriously affected the demand of steel; influenced by serious traffic accident of 7.23 Wen-Yong high-speed rail line and the tightened domestic macroeconomic liquidity, the sales of the company’s dominate products, railway bearing steel, declined significantly, and the operation revenue proportion contributed by the product declined 4 percentage points to 10.63%.

Gross Margin of Daye Special Steel by Products, 2009-2011

Source: Daye Special Steel; ResearchInChina

The bearing steel of Daye Special Steel had the highest gross margin among its products. In 2011, the gross margin of bearing steel products was 9.3%, a large decrease of 5.4 percentage points. And the gross margin of stainless steel die fell for three consecutive years, the operation of stainless steel die turn red in 2011.