PetroChina, China Life and China Unicom issue profit warnings

PUBLISHED : Wednesday, 25 January, 2017, 8:02pm
UPDATED : Wednesday, 25 January, 2017, 11:49pm

Blue chips PetroChina, China Life Insurance and China Unicom have issued warnings, saying that they expect to post major declines in profit for fiscal 2016.

PetroChina, the nation’s largest oil and gas producer, estimated that its net profit has dropped by 70 to 80 per cent to between 7.1 billion yuan and 10.7 billion yuan based on mainland Chinese accounting standards, compared to 35.65 billion yuan in 2015.

PetroChina’s implied estimated fourth quarter net profit was between 5.4 billion yuan and 9 billion yuan, amid a rebound in oil prices amid an expected supply cut.

In a Hong Kong stock exchange filing, the energy giant attributed the profit decline to lower oil and gas prices due to ample supply.

“In 2017, it is expected that the supply and demand for global oil market will gradually become balanced and international oil prices will recover,” the company said in the filing.

China Life, the nation’s largest life insurer, estimated that its net profit has fallen 40 to 50 per cent to between 17.4 billion yuan and 20.8 billion yuan, compared to 34.7 billion yuan in 2015.

It attributed the decline to a “decrease in investment income and the impact of the update of discount rate assumption of reserves of traditional insurance contracts”.

The company has previously booked a 60 per cent year-on-year drop in net profit to 13.53 billion yuan for last year’s first nine months, amid lacklustre stock and bond market performances.

This implies its fourth-quarter net profit could amount to between 3.87 billion yuan and 7.27 billion yuan.

China Unicom, the country’s second-largest wireless network operator, said its net profit for last year declined 94 per cent to an estimated 630 million yuan from 10.56 billion yuan in 2015.

The company attributed the decline mainly to the 9.25 billion yuan one-off gain from the disposal of its tower assets in 2015 and payment of tower usage fees from last year, as well as higher energy charges, property rentals, network costs, and selling and marketing expenses in the past 12 months.

Morgan Stanley analysts said in a report on Wednesday that Unicom’s estimate was slightly better than their forecast of a net loss of 467 million yuan.

Unicom’s estimate also implied a net loss of 950 million yuan in the fourth quarter of last year, they added.

Meanwhile, several metal mining and smelting firms have issued positive profit alerts.

China Shenhua Energy, the listed unit of the nation’s largest coal miner Shenhua Group, said its net profit rose 41 per cent to an estimated 24.89 billion yuan in 2016.

It attributed the increase to higher coal prices thanks to Beijing’s output control measures, higher sales volume and lower mining costs.

Rival Yanzhou Coal Mining said its net profit surged an estimated 120 to 140 per cent from 859.5 million yuan in 2015.

Thanks to sharply higher steel prices, Angang Steel said it expects to post a net profit of 1.61 billion yuan for 2016, a major turnaround from a loss of 4.59 billion yuan in 2015, while Maanshan Iron and Steel expects to turn in a profit of 1.23 billion yuan from a loss of 4.8 billion yuan in 2015.

Citi’s metals and mining analyst Jack Shang expected steel prices to be supported this year by further plant closures in China’s steel sector.

“We see support for steel prices due to potentially more capacity cuts in the second half of 2017 as local governments consider capacity reduction as a political task,” he wrote in a report in which he projected industry capacity utilisation to rise to 71 per cent this year from 70 per cent last year, but still below an average of 80 per cent in the past decade.