Citic unveils HK$20b in capital spending after profit rises 31pc
Red-chip conglomerate Citic Pacific will set aside HK$20 billion for capital spending this year to expand its mainland property, special steel and related raw material core businesses after reporting a 31 per cent growth in annual profit.
Chairman Larry Yung Chi-kin said the company planned to increase capital expenditure by 43 per cent from last year's HK$14 billion.
The biggest investment in steel related business will be in its iron ore project in the Pilbara region of Western Australia, in which total capital needed will rise to US$3.5 billion from the initial estimate of US$2.5 billion.
The increase was a result of expanded planned production scale, industry-wide cost pressures, inflation in the global mining industry and the depreciation of the US dollar against the Australian dollar and the yuan, Mr Yung said.
'Once our iron ore mine in Australia is completed, it will become a new source of earnings growth,' he said.
Overall, the company will spend about HK$7 billion on its Australian iron ore project this year, HK$7 billion on special steel and related raw materials, and the rest on property projects on the mainland.
Investments also include the HK$1.6 billion purchase of a 30 per cent stake in a mine in Shandong.
The Pilbara mine, which is 70 per cent owned by Shandong Xiwen Coal Industry, will be capable of producing up to 6 million tonnes a year of high quality coal for the production of coking coal, a key ingredient for steelmaking.
The company also plans to invest more than US$100 million in doubling the annual capacity of its newly acquired coking plant in Anhui province to 1.8 million tonnes.
The Hong Kong-listed arm of China's biggest state-owned investment firm yesterday said last year's net profit rose to a record HK$10.8 billion from HK$8.27 billion a year earlier, helped by its special steel unit and one-off gains from the listing of two subsidiaries.
Its special steel business saw a profit of HK$2.24 billion, an increase of 68 per cent from a year before.
Overall profit beat the HK$8.09 billion mean estimate of a Thomson First Call survey. Analysts said earnings might shrink this year because of a lack of one-off gains.
Last year's earnings included a HK$1.9 billion one-off gain from the spin off of telecommunications arm Citic 1616 Holdings and HK$2.2 billion from consumer product arm Dah Chong Hong, as well as HK$1 billion on change in fair value of investment properties.
Excluding property revaluation gains and one-off gains from both years, underlying profit grew 36 per cent, according to executive director Chau Chi-yin.
Citic Pacific proposed a final dividend of 80 HK cents a share, unchanged from a year earlier.
