Citic Pacific bullish after profit surge
Citic Pacific, the property-to-metals conglomerate whose bottom line has been inflated by asset sales, expects recurring profit this year will not be less than last year's HK$5 billion as steel production boosts earnings.
The bullish forecast by chairman Larry Yung Chi-kin came after the group yesterday reported a 40 per cent jump in profit from operations in the first six months of the year to HK$2.5 billion. Gains were fuelled by special steel production.
Including a HK$1.9 billion one-off gain from spinning off telecommunications arm Citic 1616 Holdings, net profit leapt 44 per cent to HK$4.96 billion or HK$2.25 per share.
Citic last year recorded HK$2 billion in exceptional gains from trimming interests in Cathay Pacific Airways and Hong Kong Dragon Airlines. Exceptional gains in the future could result from the planned listing of consumer product arm Dah Chong Hong, Mr Yung said.
He declined to comment on the listing details.
A Thomson First Call consensus poll of analysts predicts full-year operating profit of HK$4.49 billion for the group, down 35 per cent.
Special steel manufacturing in the first half was the biggest contributor to recurring profit and represented about 11 per cent of the total, according to Citic deputy managing director Peter Lee Chung-hing.
The strong performance was helped by robust demand from the car, petrochemical and manufacturing industries, as well as contributions from a mill in Hebei it acquired last year. The acquisition helped lift the division's production capacity to seven million tonnes annually, the biggest in the mainland.
'Our special steel unit is performing very well, and I expect its profit will grow even faster,' Mr Yung said.
He said annual production capacity would be boosted by about three million tonnes soon.
Mr Yung said special steel manufacturing, mainland property development, and mining of iron ores and pellets in Western Australia were the group's three mainstay operations. He expected significant contribution from property development in 2009 when some residential and commercial projects in Shanghai were completed.
'Our land bank will be sufficient for development in the coming five to 10 years,' he said. 'Despite interest rate rises and other macroeconomic measures, I am positive about the prospect of the property market as demand outgrows supply.'
Mr Yung said Citic would continue to weed out non-core assets such as a 25 per cent stake in an air-cargo joint venture with Air China. A Nomura International (HK) research report predicts that assets to be offloaded by the firm would include smaller power projects as well as aviation and communications units.
Part of the gain from the Citic 1616 spin-off was distributed as a special dividend of 20 HK cents a share, albeit 33.33 per cent lower than in the previous period. The interim dividend was lifted 33.33 per cent to 40 HK cents, bringing the total payout to 60 HK cents per share.
Mr Yung said Citic Pacific was planning to issue A shares in Shanghai next year.
