Update | Citic posts annual profit decline due to troubled iron ore mining project
“Businesses in the non-financial sectors did less well,” said chairman Chang Zhenming. “The significant decline in commodity prices as well as a subdued property market affected our bottom line in these sectors.”
Citic, the mainland’s largest state-backed conglomerate, posted a 17.8 per cent drop in net profit for last year on the back of a HK$13.7 billion asset impairment charge on its much delayed and costly iron ore mining project in Australia.
Net profit was HK$39.8 billion last year, compared to HK$48.4 billion in 2013, and the figure was lower than the HK$43 billion average estimate of six analysts surveyed by Thomson Reuters.
Excluding the non-cash impairment, profit rose 10 per cent, mainly due to profit growth of its financial services businesses. Revenue fell 1.9 per cent to HK$402.12 billion.
“Businesses in the non-financial sectors did less well,” said chairman Chang Zhenming in the firm’s filing to Hong Kong’s stock exchange. “The significant decline in commodity prices as well as a subdued property market affected our bottom line in these sectors.”
It is Citic’s first set of annual result after completing last August the acquisition of almost all of its parent Citic Group’s assets not already owned by Citic, for 227 billion yuan. The deal saw its staff count surge to 125,000 from 36,500, and its net assets grow four times bigger to HK$575.5 billion.
The performance of its iron ore mining, special steel production and property operations are no longer individually reported, as they are lumped together with other businesses.
Chang did not respond to a reporter’s query yesterday on last year’s sales and profit of the iron ore operation on a standalone basis, but said the impairment charge was “well sufficient.”
It expects to complete two ore production lines this year and two more next year, and economies of scale will only be realised when all six lines are ramped up, he added.
The spot market price of iron ore delivered to the Qinhuangdao port has fallen to US$54.8 a tonne yesterday from US$71.2 at the end of last year.
Citic’s financial services – mainly banking and brokerage - saw net profit grow 14 per cent to HK$41.3 billion from HK$36.22 billion in 2013, even after booking asset impairment losses of HK$31.2 billion, while its resources and energy business saw net loss widen to HK$13 billion from a loss of HK$843 million in 2013. That is comprised of oil, iron ore, coal and metals mining and trading.
Manufacturing booked a 36 per cent net profit rise to HK$2.92 billion, while real estate and infrastructure posted a 12 per cent net profit increase to HK$7.89 billion, and engineering contract had a 5 per cent net profit gain to HK$2.38 billion.
Chang said Citic will consolidate this year its own property operations with those acquired from the parent, adding it plans to cooperate with strategic shareholder, Thailand’s Charoen Pokphand Group in the agriculture and livestock business, without giving details.
A final dividend of 20 HK cents per share has been recommended, making a total payout of 21.5 HK cents for the year, down from 35 HK cents in 2013. Citic shares yesterday closed 0.3 per cent higher at HK$13.22.
