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Hong Kong company reporting season

China Everbright waste-to-energy unit beats own forecast with 49pc first-half profit growth

The company has a cash pile of HK$10.8b as at June 30, after a HK$3.38 billion share offer and separate listing of its renewable energy and industrial waste treatment operations in May

PUBLISHED : Tuesday, 15 August, 2017, 3:03pm
UPDATED : Tuesday, 15 August, 2017, 11:00pm

China Everbright International, one of the nation’s largest developers of waste-to-energy and water treatment projects, posted a better-than-expected 49 per cent rise in interim profit, on the back of higher volume of projects completion and efficiency gains.

The company, a unit of central government-backed financial services-focused conglomerate China Everbright Group, recorded a net profit of HK$1.8 billion (US$230.8 million) for the year’s first six months, up from HK$1.21 billion in the same period last year, it said in a filing to Hong Kong’s bourse on Tuesday after the morning session closed.

The profit rise is better than its indication to investors a month ago of an expected increase of 40 per cent, and amounted to 52.4 per cent of the full-year average estimate of HK$3.43 billion of 18 analysts polled by Reuters.

“The 2017 full-year results will depend on the market environment as well as the progress and budget control of the group’s construction projects and operating projects in the second half of the year, and there are some remaining uncertainties,” China Everbright said last month.

The 2017 full-year results will depend on the market environment as well as the progress and budget control of the group’s construction projects and operating projects in the second half of the year, and there are some remaining uncertainties
China Everbright International

First-half revenue jumped 69 per cent year-on-year to HK$9.14 billion.

An interim dividend of 12 HK cents per share was proposed, up 60 per cent from 7.5 HK cents last year.

Gross profit margin slid to 36.1 per cent from 41.5 per cent in last year’s first half.

Chief financial officer Raymond Wong Kam-chung told reporters on Tuesday that the decline was due to higher contribution of construction work which commands lower profit margins than project operations.

He said the margin fall did not indicate a decline in profitability, as the firm achieved a 9.6-per cent return on shareholders’ equity in the year’s first-half, which if annualised, would be higher than the 11.5- to 16.1-per cent full-year returns seen between 2011 and last year.

Daiwa Capital Market’s head of utilities and renewables research Dennis Ip noted that the firm’s net debt-to-shareholders’ equity ratio rose to 87 per cent on June 30, from 72 per cent a year earlier, as it had borrowed more to support its growing project pipeline.

China Everbright has secured 21 new projects and two project expansion deals worth a combined 9 billion yuan in the year’s first six months, compared to 18 projects worth 9.46 billion yuan in the year-earlier period.

It had 40 projects under construction at the end of June.

Asked if the revenue growth momentum in the first-half can be sustained in the second-half, chief executive Chen Xiaoping would only say management is “very confident” of the firm’s future development.

First-half earnings before interest, taxes, depreciation and amortisation (ebitda) from construction and operation of waste-to-energy plants and sludge and food waste treatment projects, its biggest profit driver, surged 47.7 per cent year-on-year to HK$2 billion.

Ebitda from construction and operation of water treatment plants grew 27.6 per cent to HK$551.5 million, and that from biomass, industrial solid and hazardous waste treatment plants and solar and wind farms surged 53.5 per cent to HK$729 million.

“China is placing ever greater emphasis on the building of an ecological civilization, with the unprecedented support of the central government and local governments and increasing demand for the environmental restoration,” the firm said of the industry’s growth prospect in the filing on Tuesday.

After a HK$3.38 billion share offer and separate listing on the Hong Kong bourse of its renewable energy and industrial waste treatment operations in May this year, China Everbright had a cash pile of HK$10.8 billion as at June 30.

Its shares closed 1.2 per cent higher at HK$10.46 on Tuesday, after rising as much as 4.3 per cent after the midday results announcement.

They have risen 19 per cent so far this year, trailing a 23.5 per cent gain of the Hang Seng Index.

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