Moody's: China Automation profit drop is negative

Moody's Investors Service said that China Automation Group Ltd.'s July 18 profit announcement of a slow recovery in its railway business division and substantial year-over-year profit drop for the first half of 2012 is credit negative.

China Automation's new contract wins in its railway division, and particularly the high-margin railway signal business, dropped substantially in the first half of 2012, compared with strong first half-year results in 2011.

Moody's said this decline was due to the suspension of major new railway construction projects and bidding activities in China, following the government's review of the country's total railway development plan and investments after the Wenzhou high-speed train accident in July 2011.

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