Citic Resources Holdings, the oil and metals arm of Beijing-backed conglomerate Citic Group, expects challenging times for the remainder of the year amid depressed commodities prices even as underlying profit more than doubled last year. The company recorded net profit of HK$204.25 million for last year, down 27.8 per cent from HK$282.77 million in 2007. The result was affected by a HK$6.42 billion provision for impairment on property, plant and equipment in its oil production business. However, this was largely offset by a HK$4.75 billion tax credit due to a change in its tax rate in Kazakhstan from 30 per cent last year to 20 per cent this year, 17.5 per cent next year and 15 per cent from 2010 onwards. Citic Resources did not provide reasons for the huge impairment loss, which followed a sharp drop in crude oil prices. The write-down saw assets in the company's oil operation decline 29.4 per cent to HK$15.32 billion at the end of last year from HK$21.69 billion a year earlier. Earnings before interest, tax, depreciation, amortisation and provision for property, plant and equipment impairment soared 153.2 per cent to HK$4.21 billion from HK$1.66 billion in the previous year. After accounting for interest, depreciation and amortisation, the pre-tax and impairment profit soared 115.9 per cent to HK$1.72 billion. Still, Citic Resources said this year's outlook would be challenging given lower commodities prices. International crude oil prices have fallen about two-thirds from a peak of US$147 a barrel in July last year to about US$52. Aluminium prices fell 54 per cent and copper prices tumbled 48 per cent. 'The energy and commodities sectors in which the group operates will continue to be placed under pressure and hardship due to the worsened global economic situations,' the company said. Thanks to its US$1 billion acquisition of its parent firm's 47.3 per cent stake in Kazakhstan's state oil and gas firm Karazhanbasmunai in May 2007, Citic Resources' operating profit from oil operations jumped to HK$1.36 billion last year from HK$221.76 million in 2007. The company did not provide its oil production figures and average selling price. Its second-largest profit contributor, manganese mining, recorded a 14.8 per cent rise in operating profit to HK$504.11 million. Operating profit from aluminium smelting plummeted 54.5 per cent to HK$95.92 million while that from coal production rose to HK$188.52 million from HK$14.64 million. Citic Resources' interest expense last year jumped 72.8 per cent to HK$937.94 million from HK$542.58 million since it borrowed heavily to finance acquisition of its parent's oil assets in Kazakhstan in 2007. Net debt-equity ratio stood at 115 per cent at the end of last year, down from 165 per cent, after it raised HK$2.52 billion from a rights issue at HK$3.20 each. Citic Resources shares last Thursday closed at HK$1.03.