Citic annual profit rises 5 per cent, slightly below analysts’ estimates

Citic Securities chairman Zhang Youjun says none of the 11 staff detained as part of an insider trading probe that began last year have been found to have done anything wrong

PUBLISHED : Thursday, 24 March, 2016, 4:02pm
UPDATED : Thursday, 24 March, 2016, 10:03pm

Citic aims to slash production costs of its iron ore mining project in Australia to “internationally competitive” levels, after all six production lines come on stream this year following years of delay and major cost overruns.

Speaking after announcing a 5 per cent rise in 2015 net profit, Citic chairman Chang Zhenming said he is seeking to lower the per tonne cash production cost – which excludes depreciation – to between US$50 and US$60 a tonne when in full operation. The iron ore price tumbled from around US$125 a tonne in 2014 to just below US$40 a tonne in December but has since recovered to just over US$50 in recent weeks.

In a filing to Hong Kong’s stock exchange Thursday, said its net profit for last year amounted to HK$41.81 billion, up from HK$39.83 billion in 2014. The result was lower than the average estimate of HK$48.7 billion by six analysts polled by Thomson Reuters.

Net profit from financial services – mainly banking and brokerage, its biggest profit contributor – surged 27.8 per cent to HK$52.75 billion, while that of real estate fell 11.9 per cent to HK$4.14 billion. Revenue grew 3.7 per cent to HK$416.81 billion.

Citic shares fell after the announcement, ending 1 per cent lower at HK$11.84 on Thursday.

The net loss from resources and energy operations widened to HK$17.25 billion from HK$13 billion in 2014, owing to the slump in prices of crude oil, iron ore and other industrial metals.

Citic last week said it will sell property projects worth around 31 billion yuan (HK$37.02 billion) to China Overseas Land & Investment in exchange for a 10 per cent stake in the state-backed property giant and 6.15 billion yuan of its commercial properties.

Chairman Chang Zhenming said in the filing that it “made good sense to align our property business with a company [China Overseas] with a solid track record in China’s residential property market.”

“In addition to being a leader in its space, [China Overseas] is already well known to us: their largest shareholder, China State Construction Engineering Corporation, is a long-term strategic partner of [our parent] CITIC Group.”

Citic expects to book a gain of HK$9 billion to HK$11 billion from the disposal, on which an agreement was signed on March 13.

A final dividend of 20 HK cents per share was proposed, bringing the total dividend to 30 HK cents for the year.

Meanwhile, Citic’s brokerage arm, Citic Securities, said its 2015 net profit jumped 74.7 per cent from a year earlier to 19.8 billion yuan.

Citic Securities chairman Zhang Youjun, speaking at a press conference Thursday, said that none of the 11 staff detained as part of an insider trading probe by mainland securities regulators that began last summer have been found to have done anything wrong.

“According to disclosed information, no staff is found to be involved in insider trading,” Zhang said.

Zhang did not comment on the condition of the seven employees who released in February, nor the four that remain under detention. The staff were taken into detention as part of the investigations last August.

He said the company had taken steps to strengthen internal controls by assigning staff to the roles of risk management officer, chief compliance officer and company secretary.

“The probe was the severest test for the company since its establishment, and also led to a comprehensive check-up on the firm itself,” Zhang said. “But our operation and development have maintained stable.”

Citic Securities’ Hong Kong-listed shares slid 1.88 per cent to close at HK$17.74 on Thursday.