Pipelines feed profits to Panva
Utility reports 34pc increase in earnings, driven by its pipe construction unit, but warns of the impact of higher gas costs
Panva Gas Holdings, one of the mainland's largest privately owned suppliers, has warned that recent higher gas prices would eat into profitability.
But managing director Chen Wei, while not specifying the size of the price increases, said he was confident the adverse impact would be temporary.
He said the group was in talks on eight projects, largely for piped gas supply in northeastern China.
'We hope to conclude six to eight new projects this year,' Mr Chen said.
Panva, in which conglomerate Hutchison Whampoa has a 4.08 per cent stake, announced a 34.01 per cent jump in net profit to $128.24 million in the six months ended June.
Fuelling the profit growth was the construction of gas pipelines, the most profitable business segment since it involves charging customers a one-off connection fee for piped gas services.
This business, which grew 31.13 per cent on turnover to $199 million, enjoyed the highest profit margin ranging from city to city from 78 per cent to 84 per cent. It accounted for 20.79 per cent of the group's $958.05 million turnover.
Gross profit margin climbed 3.29 percentage points to 23.49 per cent in the first half and the margin of earnings before interest, tax, depreciation and amortisation rose 7.57 percentage points to 23.48 per cent.
The first-half profit included a deficit of $4.2 million as a result of new accounting standards on the fair value of hedging instruments involving the interest swap of a US$200 million bond from fixed interest rate to floating rates.
Mr Chen said the number of piped gas customers grew a healthy 15.15 per cent to 525,100, showing the group was relatively unscathed by the government's tighter macroeconomic policies.
Analysts have worried about a slowdown in customer growth for piped gas companies as the policies curb property projects, especially residential.
The wholesaling of liquefied petroleum gas (LPG) was relatively lacklustre, showing a 10.71 per cent decline in turnover contribution, partly due to lower prices.
LPG wholesale growth shrank 17.99 per cent to 150,000 tonnes but sales of piped natural gas were up 88 per cent to 42.3 million cubic metres.
The population coverage of LPG services fell marginally to 73.49 million as at the end of June from 73.61 million at the end of last year.
'The reason for the smaller customer number is that we have no new LPG projects in the first half, and some customers have shifted to piped gas,' Mr Chen said. 'However, we are confident of profit growth without relying on new projects and growth in customer numbers.'