Huaneng Power posts 16.5pc profit slump
Huaneng Power International, the listed flagship of the mainland's largest power producer, China Huaneng Group, said its operating profit for the third quarter fell 16.5 per cent from a year ago.
The decline was due to higher coal costs, the absence of a power tariff increase and lower plant utilisation that squeezed margins, analysts said.
Huaneng Power said operating profit fell to 1.77 billion yuan for the quarter to September from 2.12 billion yuan a year earlier, based on mainland accounting standards. Operating margin narrowed to 16.5 per cent from 18.2 per cent.
Net profit rose 3.9 per cent to 1.52 billion yuan, as corporate income tax charges dropped more than half to 194.15 million yuan from 406.7 million for the same period last year.
A spokeswoman said the tax cut was not due to lower tax rates but probably lower profits at plants that were subject to high tax rates.
Turnover climbed 9.2 per cent on the back of a 6.6 per cent rise in generation output, slower than 13.9 per cent growth in the first half.
For the year's first nine months, net profit rose 25 per cent to 4.46 billion yuan, partly helped by a 673 million yuan gain from the sale of shares in Shanghai-listed Yangtze Power.
The company did not provide details of its cost structure breakdown for the third-quarter.
Huaneng was the most vulnerable to higher coal prices among the five Hong Kong-listed mainland power producers, Citigroup head of regional utilities research Pierre Lau warned this month in a research report. He said the firm was the most reliant on seaborne coal transport and had the lowest third-quarter generation growth.
The average price of coal transacted at the Qinhuangdao port in the north rose 11.4 per cent year on year to 490 yuan a tonne in the middle of this month while the freight rate from the port to Guangzhou doubled to 128 yuan a tonne in the May-September period.
JP Morgan analysts Edmond Lee and Boris Kan estimated that Huaneng's average third-quarter plant utilisation rate fell 7.1 per cent to 66.7 per cent.
A lower utilisation rate squeezes margins as higher fixed costs are borne by the same amount of sales.
'Despite continued shutdown of small-scale power plants [10 gigawatts for the full year], we expect full-year capacity addition to come in at 108 GW,' the analysts said, estimating industry capacity growth at 17 to 18 per cent, exceeding the 14 to 16 per cent growth in demand. The nation had 622 GW at the end of last year.
Output from hydropower plants surged 42.4 per cent year on year in August, leading to a 9.6 per cent fall in coal-fired plant utilisation to 69.4 per cent for that month, they said.
Huaneng's share price closed 2.15 per cent up at HK$9.96 yesterday.