Towngas underlying profit gains 8.9pc on cross-border gas sales
Hong Kong and China Gas (Towngas) posted an 8.88 per cent growth in underlying profit to HK$1.96 billion in the first six months of the year, as a sharp rise in its mainland piped-gas projects offset a lacklustre performance on its Hong Kong home turf.
Net profit jumped 6.37 per cent to HK$5.76 billion, or 90.3 HK cents per share. The utility benefited from a HK$2.23 billion gain from an asset swap with associate Towngas China, a HK$728.2 million profit in apartment sales and HK$572.2 million revaluation in investment properties.
Strong gas sales at Towngas' 60 projects across the border generated a HK$317 million profit, 68 per cent higher than a year earlier. Towngas China, which became a Towngas associate in March, contributed HK$30 million.
'Good, good, good,' an analyst with a European brokerage said yesterday when asked to comment on the interim results. 'The mainland gas projects stole the show.' Many analysts were impressed by the growth in the underlying profit and will upgrade their earnings forecast for the full year. A Thomson First Call poll of 15 analysts showed a full-year net profit of HK$6.34 billion, up 8.3 per cent from last year.
Towngas, which has supplied commercial and residential naphtha piped-gas to Hong Kong for 145 years, said gas sales barely changed at 15,020 million megajoule compared with 14,995 million MJ previously. But there is a downward trend in residential consumption.
Chairman Lee Shau-kee said poor gas sales, compounded with rising operating costs, put the utility's mainstay gas business under 'increasing pressure'.
He also warned that property development profits would wane.
However, the company had no immediate plans to lift tariffs, a spokeswoman said. Revenue after fuel cost adjustments rose 6.37 per cent to HK$5.76 billion.
In the mainland, Towngas will step up growth through acquisitions. Towngas China will focus on downstream piped-gas supply investments, while Towngas will look to investments in alternative energy sources.
The spokeswoman said Towngas was in talks to invest in new energy sources that could replace liquefied petroleum gas and diesel and were ideal substitutes for vehicle fuels. 'Right now, we have new energy projects under discussions in Chongqing, Inner Mongolia and Shanxi,' she said.
The profit generated by Towngas' mainland projects, in HK$317m