Xinao plans to ditch small projects
Gas supplier to focus on larger-scale operations after 24pc gain in profit
Xinao Gas Holdings, one of the mainland's largest privately-owned piped-gas providers, plans to reduce stakes in about 20 per cent of its 56-strong portfolio in a move to enhance efficiency and return.
Executive director and chief executive Yang Yu, announcing the group's 24 per cent rise in interim net profit to 110.71 million yuan yesterday, said some of the 11 smaller projects could be sold off completely.
The projects earmarked serve populations of fewer than 200,000 in the cities of Shandong, Jiangsu and Zhejiang provinces, and towns near Beijing, he said.
'We have almost 60 management teams managing nearly 60 projects, with so many managers that some of them I don't even know,' Mr Yang said. 'Therefore, focusing on larger projects and sales of smaller ones is inevitable if we want to run each project well.'
Asked if the sales aimed at weeding out underperforming projects, he said the key motive of the consolidation was to enhance management, safety and efficiency.
He added that profit contribution of the smaller projects was 'insignificant'.
Most of Xinao's projects supply piped gas to cities with populations of about 400,000, with several such as the Dongguan project serving up to 3.7 million.
During the six months to June, Xinao's net profit was helped by a 45.3 per cent jump in turnover to 853.6 million yuan.
Gas sales soared 71.1 per cent to 333.2 million yuan in the first half while the group's main earner, a one-time subscription fee to piped gas services or connection fees, grew 29.5 per cent to 411 million yuan.
Earnings per share were 16.6 per cent higher at 12.6 fen.
Mr Yang said the group was forced to shelve a plan to introduce strategic shareholders by selling shares even though talks were held at one stage with interested parties such as Tokyo Gas of Japan.
He said Xinao's controlling shareholder, chairman Wang Yusuo, needed to maintain his majority shareholding as a key condition of the group's US$200 million convertible bond issued last month.
'It is impossible to have co-operation with Tokyo Gas on the holding level at this stage, but we will explore co-operation on a project level,' Mr Yang said.