Citic Pacific in good form after revised hedges

PUBLISHED : Tuesday, 26 May, 2009, 12:00am
UPDATED : Tuesday, 26 May, 2009, 12:00am

Citic Pacific's new chairman said yesterday the troubled conglomerate performed well in the first quarter and it would not be affected by future moves in the Australian dollar since it had restructured all related foreign exchange contracts.

'All of the Australian-dollar leveraged foreign exchange contracts Citic Pacific kept have been restructured into genuine hedges to match the needs of our iron ore business,' Chang Zhenming said.

Mr Chang said Citic Pacific was seeking a new managing director.

He also said the company had no plans to sell its stake in Cathay Pacific Airways and he indicated that some members of the family of former chairman Larry Yung Chi-kin would retain a role in the company.

Mr Chang also said Citic Pacific had sufficient funds for its 15 billion yuan (HK$17.04 billion) investments that are earmarked for its special-steel business and Australian iron ore project over the next two years.

The steel-to-property conglomerate, which reported a HK$12.66 billion loss last year due to massive losses from unauthorised currency bets, booked a HK$14.63 billion loss from the currency derivatives after its bets on the Australian dollar soured when the US dollar unexpectedly rose against it.

Mr Chang, a vice-chairman and president of Beijing-based parent company Citic Group, said Citic Pacific had no plans to raise funds through a share placement but it might consider selling more non-core assets.

The company is conducting a review of its development strategy and approach.

'Businesses that do not generate satisfactory returns, or where we cannot actively participate in management, we intend to either sell or restructure,' Mr Chang said, without giving a timetable.

However, he said the company had no plans to sell its stake in Cathay or its tunnel assets in Hong Kong as they were 'important parts' of Citic Pacific's assets.

Citic Pacific would also find ways to enhance co-operation with its parent company, especially in the mainland property business, in order to achieve synergies, he said.

Mr Chang said he would remain in his position as the blue-chip company's chairman but would look for a new managing director in the next few months.

He replaced Mr Yung and managing director Henry Fan Hung-ling who resigned after a police raid on Citic Pacific's headquarters last month following the investment loss.

The parent company might send more representatives to the board according to business needs, he added.

Meanwhile, Mr Chang said Citic Group did not have plans to buy shares from Mr Yung, who still has a stake of about 10 per cent in Citic Pacific after he sold 60 million shares earlier this month.

'It is his own personal decision, there is no obligation [for him] to notify us,' Mr Chang said on the sale of assets by Mr Yung.

Mr Chang also said Mr Yung's children - Carl Yung Ming-jie, Frances Yung Ming-fong and Andy Yung Ming-tai - were still working in Citic Pacific and the company would 'treat all staff alike', dismissing speculation that they would be removed or sidelined.

Indeed, executive director Carl Yung was seated on the right-hand side of Mr Chang at the company's annual meeting yesterday.

Investment funds

Amount the firm will invest in special-steel and iron ore projects, in yuan: 15b yuan