ENN Energy on track to meet target
Wang Dongzhi, chief executive of mainland city-gas distributor ENN Energy said on Monday he saw “no problem” for the company to reach a 20 per cent target for full-year net profit growth.
Wang Dongzhi, chief executive of mainland city-gas distributor ENN Energy said on Monday he saw “no problem” for the company to reach a 20 per cent target for full-year net profit growth.
On Friday, ENN Energy posted a 19.6 per cent year-on-year rise in first-half pre-tax profit to 2.09 billion yuan (HK$2.63 billion), excluding an accounting loss on the change in value of a convertible bond in the first half of last year.
The result was achieved despite a 3.3 per cent year-on-year fall in first-half profit in its nascent vehicular gas refuelling operation to 265 million yuan, as customer demand weakened after a gas price increase in July last year. Another increase will take effect at the start of next month.
Profit from fees charged to connect customers to its network surged 13.4 per cent year on year to 1.32 billion yuan, while that from piped gas sales grew 6.6 per cent to 1.31 billion yuan.
According to a Daiwa Securities research note, ENN’s first-half distribution profit margin for each cubic metre of gas sold fell by 12 per cent to 76 fen from 86 fen in the first half of last year.
This was due to a failure to pass through all of last July’s gas cost increase to end-users, which resulted in a 100 million yuan profit reduction.
In Quanzhou, Fujian province, while gas sales grew substantially, the first-half profit margin was squeezed to 31 fen per cubic metre from 50 fen in the same period last year, Daiwa said, adding that management had blamed the deterioration on a “preferential tariff offered to porcelain manufacturers as requested by the [local] government” that had trimmed 120 million yuan from profit.
Its vehicular sales profit margin was down 6.4 per cent year on year to 1.17 yuan per cubic metre.
“To compensate for the margin squeeze and in order to achieve the 20 per cent year-on-year net profit growth target, ENN has focused on gas sales volume growth,” Daiwa’s analysts said.
ENN is targeting 25 per cent sales volume growth to 10 billion cubic metres, excluding wholesales volume, for the whole of this year.
ENN’s share price dropped by 2 per cent on Monday to close at HK$56.80, and was trading 2.1 per cent lower at 11.31am on Tuesday at HK$55.60.
