Property, steel to brace Citic profits
Conglomerate earmarks $8b for asset acquisitions as chairman eyes disposal of non-core holdings
Citic Pacific, run by Larry Yung Chi-kin, China's richest man according to Forbes magazine, plans to raise its stakes in mainland property projects and special steel manufacturing to fill the earnings gap left by the sale of its stake in Festival Walk.
With a land bank of 10 million square metres in prime sites in cities such as Shanghai, Ningbo, Wuxi, Yangzhou and Hainan, group chairman Mr Yung expects the projects to reap huge rewards in the next few years.
The conglomerate yesterday announced a net profit of $3.98 billion for last year, a 12.87 per cent increase on 2004.
Earnings per share were $1.82 and a final dividend of 80 cents per share was recommended, unchanged from a year earlier.
The company had a $520 million gain from property revaluation, $181 million in 2004.
A slump in earnings from aviation and power plant businesses hurt by high oil and coal prices was offset by an 84 per cent increase in steel manufacturing profits.
Citic makes special steel, such as fasteners, ball bearings and metal gears, at plants in Jiangsu and Hubei provinces.
Managing director Henry Fan Hung-ling said: 'We expect our steel business to perform even better this year.'
He gave no details.
The company's capital expenditure for this year is $10 billion, of which $5 billion has been set aside for property projects in the mainland and $3 billion for the acquisition of steel manufacturing plants, two sectors of which Mr Yung is highly optimistic.
After the sale of its 50 per cent stake in Festival Walk in Kowloon Tong, Citic has $7 billion cash on hand with net gearing just above 20 per cent.
Selling non-core businesses, assets in which Citic has less than a 25 per cent stake and no direct involvement in day-to-day operations, has long been the management's intention.
But the conglomerate has yet to identify any such assets for sale or give a timeline for the planned disposals.
Mr Yung reiterated that calling them non-core assets did not mean they were not important in terms of profit contribution.
'We have been listening to the opinions of the investing world for some time,' he said. 'However, it is always easier said than done selling non-core businesses abruptly.'
It is believed that the aviation business - Citic owns 25.4 per cent of Cathay Pacific Airways, 28.5 per cent of Hong Kong Dragon Airlines and 10 per cent of Hongkong Air Cargo Terminals - and its 50 per cent stake in financial business Citic Capital are the top of the group's disposal list.
Citic has been a supporter of the restructuring of Cathay Pacific and Dragonair.
Citic shares yesterday fell 1.06 per cent to close at $23.30.
