The net profit of Hongkong and China Gas (Towngas) fell last year for the first time in 15 years on the back of poor economic conditions and lower interest income. The dominant piped-gas supplier yesterday reported a HK$3.08 billion profit for the year to December 31, down 3 per cent from HK$3.18 billion in 2001. It said gas sales had risen just 0.28 per cent to 26,640.8 million megajoules as deflation continued to bite and temperatures were generally warmer. Also hitting earnings was a 60.45 per cent fall in interest income to HK$123.5 million, due to low interest rates and Towngas spending HK$4 billion buying back shares. Investment income slid 52.94 per cent to HK$79.2 million as the company made no stock investments. Summing up last year's performance, Towngas managing director Alfred Chan Wing-kin told the South China Morning Post: 'Our profit declined for the first time in 15 years, but I feel satisfactory about staff members' hard work in opening up income sources and cutting costs.' Mr Chan said the company had managed to cut costs by HK$47 million last year, cushioning the adverse impact of a tariff freeze and poor gas sales. The results were worse than analysts had expected, but some were impressed by the company's efforts to minimise costs. JP Morgan managing director of utilities research Bill Laukka said: 'It's a very solid set of results in a very flat year. The overall core operating profit went up 6 per cent on almost flat demand growth. It does reflect a very conservative management focus on cost control.' The share buy-back helped lift earnings per share by 2.26 per cent to 54.20 HK cents. The final dividend was the same as 2001 at 23 HK cents, taking the full-year payout to 35 HK cents. As the firm warned last December, Towngas declared no bonus shares but promised dividend payouts for this year would not be less than those of last year. By supplying naphtha piped-gas to 1.47 million customers in Hong Kong, Towngas had amassed a market share of about 61 per cent, Mr Chan said. Its dominance and impressive return on assets have prompted calls for Towngas to be put under government regulation. Rejecting the calls, Mr Chan said Towngas had behaved well by keeping tariffs frozen since 1998, while continuing to plough capital into upgrading gas pipelines and services. Investment in pipelines and facilities stood at HK$653 million last year, he said. 'Regulating Towngas means a step backward as overseas markets including China are deregulating utilities,' Mr Chan said. China's deregulation of its massive utility sector has led to Towngas' investment in 12 piped-gas mainland joint ventures. Mr Chan said the projects had contributed 42 million yuan (about HK$39.42 million) in net profit last year.