Towngas reports 3.3 pc interim profit rise, maintains dividend

Hong Kong and China Gas (Towngas), the city’s only piped gas utility with a major presence in the mainland market, posted a 3.3 per cent rise in interim profit.

The company recorded a net profit of HK$4.47 billion (US$571 million) for the year’s first six months, up from HK$4.33 billion in the same period last year, the company said in a filing to Hong Kong’s stock exchange on Monday after the market close.

The profit is slightly higher than HK$4.4 billion estimated by Citi head of Asia utilities equities research Pierre Lau, and amounted to 59 per cent of the HK$7.55 billion full-year estimate of 13 analysts polled by Bloomberg.

“The company predicts steady growth in its number of customers in Hong Kong [this year thanks to] favourable employment conditions that are helping to stimulate internal demand ,” chairman Lee Shau-kee said in the filing, adding that the government’s efforts to raise land and housing supply will help increase gas demand in the next few years.

On the mainland, he expects growing exports of manufactured goods helped by the stabilising yuan, and state policy favouring the replacement of coal with cleaner burning natural gas to lift industrial gas demand.

An interim dividend of 12 HK cents was proposed, same as that in both last year and 2015.

First-half revenue grew 9 per cent year-on-year to HK$15.4 billion, mainly due to higher mainland gas sales volume.

First-half earnings before interest, taxes, depreciation and amortisation (ebitda) from the Hong Kong gas business edged up 0.57 per cent to HK$2.6 billion, while that of gas, water and related businesses in mainland China grew 1.1 per cent to HK$2.4 billion.

Operating profit margin of the mainland businesses fell to 26.6 per cent from 29.8 per cent in the year-earlier period despite a 13 per cent rise in revenue, amid stiffer industry competition.

Ebitda of new energy and coal-to-chemicals operations jumped 38.7 per cent to HK$400.1 million, helped by higher chemicals output and selling prices from its plant in Inner Mongolia autonomous region and higher output from its coal seam gas processing facilities in Shanxi province.

The volume of gas sales in Hong Kong grew 0.8 per cent year-on-year in the year’s first half thanks to higher demand from commercial and industrial customers, while that on the mainland where it had 131 gas distribution projects grew 13 per cent to 9.72 billion cubic metres.

In non-gas businesses, Towngas expects to commission a project in Suzhou, Jiangsu in the third quarter of next year, which can process 500 tonnes of food and plant wastes and landfill liquids into natural gas, oil products, solid fuel and fertilisers.

In Hong Kong, it is also targeting to start commercial operation of a project to utilise landfill gas collected in southeast New Territories in November this year.

Towngas shares Monday closed 0.7 per cent higher at HK$14.86 ahead of the results filing. They have gained 19 per cent so far this year, trailing the Hang Seng Index’s 23.4 per cent rise.