Forex losses and provisions push China Gas Holdings’ interim net profit down 22.4 per cent
Natural gas distributor trims sales target again
China Gas Holdings, one of the mainland’s largest natural gas distributors, has further revised down its gas sales target by 9 per cent to 10 billion cubic metres (bcm) for the 12 months to March 31 next year, as Beijing’s recent gas price cut to boost demand of the cleaner-burning fuel means it only has four months to catch up on growth.
But the company has maintained the 14 bcm target for the following financial year, betting customers will respond to the price cut and partial price liberalisation.
“The price cut will certainly help stimulate demand,” chairman Liu Minghui said. “The price cut has seen gas price fall from the equivalent of US$90 a barrel of oil price to US$60 ... given the oil price has been trading at US$40 to US$50, there is room for gas price to fall further.”
Also contributing to the target cut was a delay in the completion of gas distribution assets being acquired from China Gas’ largest shareholder, Beijing Enterprises, Liu said.
After the market close on Wednesday, Shenzhen-based China Gas posted a 22.4 per cent year-on-year decline in net profit to HK$1.3 billion for the six months to September 30, on the back of one-off non-operating costs.
Excluding items such as HK$305 million of foreign exchange loss from the yuan’s devaluation on its mostly US dollar-denominated debt and a provision of HK$279 million for litigation damages related to disputes over the issuance of shares options to two ex-directors, underlying net profit would have risen 27.3 per cent to HK$1.97 billion, it said.
Gross profit margin rose to 25 per cent for six months, from 20.2 per cent in the year-earlier period, thanks to better profitability of its liquefied petroleum gas business.
First-half revenue fell 9.2 per cent to HK$14.15 billion due to a 28 per cent drop in revenue on the sale of liquefied petroleum gas, whose price moves in tandem with that of crude oil.
Piped natural gas revenue grew 11.3 per cent year on year to HK$6.15 billion, on the back of a 7.2 per cent rise in sales volume to 4.49 bcm.
In June, the company cut its piped gas sales target for the 12 months to March 31 next year to 11 bcm from the 12 bcm targeted earlier, after the sharp drop in international prices of crude oil and its derivatives liquefied petroleum gas (LPG) severely eroded the competitiveness of cleaner-burning but more expensive natural gas, whose price is regulated by Beijing.
From last Friday, Beijing cut the average benchmark wholesale prices of natural gas by 28 per cent. It also allowed producers and wholesalers to set their own prices – up to 20 per cent below the benchmark prices – from that day.
They will also be allowed to price their deals up to 20 per cent above the benchmark prices from next November.