China Gas eyes 82pc sales increase and budgets HK$2b for expansion

PUBLISHED : Friday, 25 July, 2008, 12:00am
UPDATED : Friday, 25 July, 2008, 12:00am

Piped gas distributor China Gas Holdings aims to raise its gas-sales volume by up to 81.8 per cent this financial year and plans to plough HK$2 billion into expansion.

The increase in gas-sales revenue will help the company reduce its reliance on installation fees, which are high margin but charged only once to users for first-time access.

A day after the company posted a 40.4 per cent year-on-year decline in net profit to HK$119.77 million for the year to March 31, managing director Liu Minghui said the company planned to sell 1.8 billion to 2 billion cubic metres (bcm) of gas in the year to March 31 next year.

Sales volume jumped 165.8 per cent to 1.1 bcm in the previous year.

The profit decline was attributable to a HK$166.88 million one-off accounting charge stemming from the conversion of a US$40 million convertible bond into shares.

The company also incurred a HK$79.62 million loss on the impairment of receivables due from a customer for contract work, and HK$57.19 million of provisions for trade and other receivables.

Gross profit surged 77.7 per cent year on year, driven by a 125 per cent rise in gas sales revenue to HK$1.69 billion and a 58.9 per cent increase in connection fees to HK$615.28 million.

Mr Liu said the company faced a bottleneck in gas supply hindering development of its portfolio of 68 city gas concessions which it aimed to raise to 75 by March 31 next year.

'Domestic gas output will certainly not be able to meet demand and our projects in eastern China have seen resource shortages' he said. 'It is estimated that China's gas demand will reach 100 bcm by 2010 but supply will only be 80 bcm.'

To reduce the impact of the shortages, the company plans to import directly liquefied petroleum gas (LPG) from Oman next year. It currently buys through third parties.

Mr Liu said annual mainland LPG consumption was estimated to rise to 30 million tonnes by 2020 from 22 million tonnes.

China Gas shares fell 2.7 per cent to HK$1.81 yesterday.