Citic profit misses es­ti­mates amid losses from re­sources unit

The Pak Banker - - COMPANIES/BOSS -

Citic Ltd., China's big­gest con­glom­er­ate, re­ported a lower-than-es­ti­mated 5 per­cent gain in 2015 profit as losses in re­sources over­shad­owed rev­enue from fi­nan­cial ser­vices.

The com­pany's net in­come rose to HK$41.8 bil­lion ($5.4 bil­lion) last year from HK$39.8 bil­lion in 2014, it re­ported to Hong Kong's stock ex­change on Thurs­day. That com­pared with the HK$48.7 bil­lion av­er­age of four an­a­lyst es­ti­mates com­piled by Bloomberg. Citic re­ported an HK$18.3 bil­lion loss for re­sources and a HK$12.5 bil­lion im­pair­ment on its Sino Iron project in West­ern Aus­tralia. Last year proved tu­mul­tuous for the con­glom­er­ate as it grap­pled with slump­ing com­modi­ties prices and in­ves­ti­ga­tions into China's sum­mer stock rout that en­snared of­fi­cials at its bro­ker­age busi­ness. Citic sold res­i­den­tial prop­erty as­sets to China Overseas Land & In­vest­ment Ltd. ear­lier this month as it sought to stream­line its op­er­a­tions.

"Un­for­tu­nately, progress in 2015 has been slower than we would have liked, and the im­pair­ment made was a key fac­tor," Chair­man Chang Zhen­ming said in the state­ment. "Clearly, we still have a lot of work ahead to grow and im­prove the profitabil­ity of our non-fi­nan­cial busi­nesses." Citic's shares in Hong Kong closed 1 per­cent lower at HK$11.84, tak­ing its slump this year to 14 per­cent. The stock ended the day 10 cents higher than be­fore the mar­ket's trad­ing break, dur­ing which its earn­ings were re­ported.

The firm has its ori­gins in Citic Group, China's first state-owned in­vest­ment cor­po­ra­tion, which was set up in 1979. The Hong Kong-listed en­tity holds stakes in com­pa­nies in­clud­ing Citic Se­cu­ri­ties Co., China's big­gest listed bro­ker­age, and lender China Citic Bank Corp.

Citic said that its loss from its re­sources and en­ergy divi­sion widened by 35 per­cent to HK$18.3 bil­lion from the pre­vi­ous year. The af­ter-tax non­cash im­pair­ment the firm de­clared on Sino Iron, which pro­duces mag­netite iron ore, was mostly due to a slump in the raw ma­te­rial's price, Citic said.

The col­lapse was part of a global com­modi­ties rout af­ter years of sup­ply growth and slow­ing de­mand from China sent raw ma­te­ri­als prices to multi-year lows. Iron ore fell as much as 80 per­cent from a peak in 2011 and while prices have clawed back some losses, Gold­man Sachs Group Inc. called the re­cov­ery tem­po­rary.

Citic's profit from fi­nan­cial ser­vices climbed 19 per­cent last year to HK$70 bil­lion. Citic Se­cu­ri­ties, its bro­ker­age busi­ness, posted a 75 per­cent surge in profit yes­ter­day, while Citic Bank re­ported a 1.2 per­cent in­crease, the two pub­licly traded units said in fil­ings to the Shang­hai stock ex­change.

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