New | China's ENN Energy sticks to profit goal despite cutting sales volume growth target
Mainland gas supplier to boost recurring net income by up to 20 per cent through reducing costs and getting new customers
ENN Energy Holdings, one of the mainland's largest city natural gas distributors, will strive to fulfil its goal set early this year to grow recurring net profit by 18 to 20 per cent despite revising down its sales volume target, mainly by cutting costs and growing new businesses.
The company aimed to achieve this by procuring cheaper gas in chilled and liquefied form in the spot market to serve new customers not connected to pipelines and enhancing operating efficiency, deputy chairman Cheung Yip-sang said.
"Chairman Wang Yusuo has given an order, which is that we must fulfil the profit growth target no matter what," Cheung said.
After posting last week a 17.8 per cent growth in recurring first-half profit, excluding gains and losses on convertible bonds, foreign exchange and receivables impairment, ENN, based in Hebei province, said it had lowered the non-wholesale gas sales growth target for the year to between 10 and 15 per cent from 15 to 20 per cent.
This came after demand for gas - a cleaner burning fossil fuel - was hit by an economic slowdown and sharp falls in market-based crude oil and coal prices that made mainland regulated gas prices more costly than alternative fuels.
Gas demand grew just over 2 per cent in the first half, much slower than the growth of 8.6 per cent seen in the year-ago period and the average of 15.3 per cent in the past 15 years.
A much-anticipated substantial price cut later this year is seen as key for Beijing to revive demand growth, although it also has to balance the interest of the state-backed oil and gas producing giants that suffered billions of yuan of losses importing gas at high prices in earlier years to ensure supply after the country embarked on a war against air pollution.
ENN had originally targeted to grow gas sales - wholesale and retail - by 25 per cent this year, after 26 per cent growth in the past two years.
But its hope was dashed after a change of heart by the state energy giants on plans to lease excess liquefied natural gas regasification capacity at their coastal terminals to private firms importing cheaper gas.
It came after a drastic demand slowdown caused by two sharp price rises, in 2013 and last year, by Beijing as part of a three-year plan to bring low domestic regulated prices in line with international levels.
The weak demand and ample supply raised fears private suppliers like ENN would increase their market share in downstream gas sales, especially if they can import cheaper gas using the terminals of rival state giants which are stuck with high-price import commitments.
Still, Cheung said ENN could procure cheaper LNG from domestic producers which had cut prices to ensure cash flow in their bid for survival amid the supply glut, and deliver it to industrial users unconnected to pipelines.
It has also offered discounts to price-sensitive existing industrial customers such as glass and ceramic makers, which are struggling to stay afloat amid the economic downturn, and new customers, in a bid to increase sales volume and cut its fixed cost per unit of gas sales.
