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Citic Pacific's first-half earnings nearly double

PUBLISHED : Thursday, 19 August, 2010, 12:00am
UPDATED : Thursday, 19 August, 2010, 12:00am

State-backed conglomerate Citic Pacific almost doubled its first-half earnings as the company continued to divest non-core businesses in a restructuring that was directed following the HK$14.6 billion of losses on wrong-way bets on the Australian dollar in 2008.

Driven by one-off gains from the disposal of a cargo handler and a power supplier, as well as strong demand for special steel, Citic Pacific recorded a net profit of HK$4.88 billion in the first six months, an increase of 97.9 per cent on the previous year.

Earnings per share rose to HK$1.34 from 68 HK cents previously as revenue soared to HK$31.87 billion from HK$18.1 billion. An interim dividend of 15 HK cents was declared, the same as last year.

The contribution from asset sales was HK$1.77 billion while earnings from one of three core businesses, special steel, totalled HK$1.15 billion, up from HK$524 million last year, which was in line with analysts' estimates.

The company said it invested HK$7 billion in its iron ore business, HK$3 billion in its steel business and HK$1 billion in its property business in the first half.

Citic Pacific's shares closed 4.2 per cent higher at HK$16.92 yesterday after the results announcement, cutting the year's decline to 19 per cent.

The Chinese conglomerate is on the road to recovery following the losses on the currency contracts that were meant to provide a hedge for its iron ore mine in Australia.

That debacle led to an investigation by regulators, a legal battle with small investors and eventually cost then chairman Larry Yung Chi-kin his job. The controversy was reignited in March this year following a land auction on Hainan Island, when the company was accused of being involved in an improper deal with its former chairman.

There was no mention of the controversy yesterday. On the contrary, current chairman Chang Zhenming said: 'Of all my years of work, I have found being the chairman of Citic Pacific the most stimulating as well as the most demanding.' Chang vowed last year that businesses that do not generate satisfactory returns would be either sold or restructured.

Last month, Citic Pacific's parent company Citic Group, the central government's first overseas investment arm, was reported to be considering a US$12 billion listing in Hong Kong by the end of next year. However, bankers and analysts said it would have to include better assets in any flotation to attract investors.