Hong Kong and China Gas (Towngas) will freeze tariffs again next year, fuelling worries over future profitability. Managing director Alfred Chan Wing-kin yesterday said the move would mean four consecutive years of no tariff increases. The pressure to raise tariffs was intensifying in the face of annual spending of about HK$600 million on facilities as well as sluggish sales, but the company had no plans to do so, he said. 'By tightening our belt, we feel that we can manage the [capital expenditure].' Towngas, which pipes gas to 1.3 million homes and businesses, has seen sales slow as restaurants, its biggest users, struggle to entice diners amid poor economic conditions. The hotter than usual weather this year had also hurt gas consumption, Mr Chan said. 'This is the hottest year for many years,' he said. 'This year's gas sales are expected to be slow.' To offset the impact of the tariff freeze, Towngas has sought to squeeze costs further and expand its reach across the border. Mr Chan said the company was committed to a 'no sacking, no pay cut' principle. He said the company had lost 20 per cent of its employees through natural attrition in the past five years, leaving it with a workforce of 1,950. In an effort to grab a slice of the mainland's booming gas market, the company is planning to finalise two projects in Wuhan and Nanjing soon. 'Discussions on the two projects, each of which has an investment of HK$1.2 billion, are progressing well and have reached an advanced stage,' Mr Chan said. 'By 2005, most of our projects will generate significant income.' However, potential flat tariff growth has prompted some analysts to downgrade their earnings forecasts for next year. Analysts also fear public resistance will lead to a tariff freeze for the next three years. HSBC Securities analyst Ivan Lee said he had lowered his forecast by 3.5 per cent to HK$3.43 billion for the 12 months to December next year. 'In November, we expect to hear intensified debate and voices over tariff [increase] petitions for 2003 for Hong Kong utilities, given the persistent deflation and high unemployment,' Mr Lee said. ING Financial Markets analyst Bill Mok Kwan-pui believed Towngas' earnings would improve next year as this year's performance had been exceptionally poor. 'This year's performance is affected mainly by the hotter weather. I expected it to improve next year,' he said. Mr Mok stuck to his earnings forecast of 11.23 per cent growth to HK$3.58 billion next year.