Citic Pacific shares drop amid fears over losses at iron ore project
Share price falls after core profit halves as analysts worry over Australian mine losses
Citic Pacific saw its share price drop 5.5 per cent yesterday after analysts slashed profit estimates, following disappointing annual results and amid concerns that the company's Australian iron ore mining project will record more losses.
On Thursday, the Hong Kong flagship of the state-owned Citic Group posted a net profit of HK$6.95 billion, 10 per cent less than the average estimate of analysts polled by Thomson Reuters.
A research report by Citi said that stripping out property revaluation and asset disposals, core profit at the conglomerate, which is involved in activities from steel to property and financial services to manufacturing, fell 52 per cent to HK$3.46 billion last year, well below analysts' consensus estimates of HK$4.49 billion.
Citi's analysts cut their forecast for Citic Pacific's underlying net profit by 34 per cent to HK$2.57 billion for this year, and by 22 per cent to HK$3.5 billion for next year. Jefferies Securities' analysts also slashed their underlying net profit estimate, by 24 per cent to HK$3.1 billion for this year and by 22 per cent to HK$4.3 billion for next year.
The analysts pointed to higher costs at Citic Pacific's iron ore project in Western Australia and lower profitability from its mainland Chinese special steel manufacturing subsidiary.