China Gas 2010 profit up 40.2% TO HK$827.4mn

The group sees more growth opportunities behind China’s implementation of its Twelfth Five-Year Plan which put emphasis on the clean energy sector.

Leading PRC piped-gas operator China Gas Holdings Limited (“China Gas”) announced its annual results for the year ended 31 March 2011.

During the year, turnover of the Group surged by 55.3% year-on-year to HK$15,861,880,000, whereas gross profit had a 37.5% year-on-year increase to HK$2,910,472,000. EBIT was HK$1,778,150,000, a 39.9% growth over last year. In the Profit and Loss Account (“P&L”) of the year under review, the Group recorded HK$46,083,000 for fair value loss of financial derivatives as there was a fair value loss of the interest rate swaps that the Group signed up for part of its debts.

As a result, profit after tax and earnings per share decreased to HK$781,322,000 and HK16.31 cents respectively. However, if non-recurring profits and losses such as change in fair value of non-cash interest rate swaps during the year was excluded, the Group’s recurring core earnings after tax and core earnings per share during the year rose by 40.2% and 30.1% year-on-year to HK$827,405,000 and HK17.51 cents respectively.

The Board has proposed to distribute a final dividend of HK2.2 cents per share (2010: HK1.7 cents), representing a 29.4% increase, according to a China Gas report.

As at 31 March 2011, the Group had cash on hand amounting to HK$6,729,033,000, up 54.3% as compared to HK$4,361,419,000 on 31 March 2010. The Group’s total bank and other borrowings amounted to HK$15,033,164,000 (31 March 2010: HK$13,316,106,000). The net gearing ratio was 0.48 (31 March 2010: 1.24).

The calculation of net gearing ratio was based on the net borrowings of HK$4,970,463,000 (total borrowings of HK$15,033,164,000 less trade finances in relation to LPG business of Shanghai Zhongyou Energy Holdings Co. Ltd. (“Shanghai Zhongyou”) amounting to HK$3,333,668,000 and bank balances and cash of HK$6,729,033,000) and the net assets of HK$10,338,156,000 as at 31 March 2011. Currently, the abundant cash on hand, lower gearing ratio and the growth in cash inflow of the gas business have created a more healthy financial position for the Group.

Apart from the letter of credit facilities taken out by the LPG import business, the borrowings in US dollars and RMB are mainly for medium-to-long term applications with a maturity period of five years for the shortest and 15 years for the longest. Thus, the Group is not facing any pressure to repay the principal loans or to refinance them. The Group has established solid long-standing relationships with Chinese (including Hong Kong) and foreign banks.

During the period, the Group’s principal banker China Development Bank (CDB) has provided the Group an eight-year refinancing facility of US$220,000,000, helping the Group optimise its debt structure. In addition, the Group has also obtained a long-term loan facility up to US$200,000,000 with Asian Development Bank (ADB) to finance its city gas project investments. Major commercial banks in the PRC including Industrial and Commercial Bank of China, China Construction Bank, Postal Savings Bank of China, Bank of Communications, Agricultural Bank of China and China CITIC Bank have also provided credit support to the Group.

Mr. Eric Leung, Joint Managing Director of China Gas, said, “The past year has been a year of opportunities and challenges to China Gas. There have been changes in the Group’s Board of Directors as well as its senior management. Nevertheless, thanks to the leadership of our Board of Directors, the support from most of our shareholders, banking and investing communities, and the concerted efforts of our entire staff, the Group has tackled the challenges, leading to steady growth of our businesses. Such growth is consistent with our strategies formulated in early 2010, driving the Group’s businesses through organic growth. At the same time, the Group’s business direction is in line with the PRC’s strong support for clean energy industries. The Board and the management are very confident towards the future development of China Gas.”

Mr. Leung concluded, “Last year, being the first year of the Twelfth Five-Year Plan of the PRC, the country has begun to set long-term planning for the energy industry, especially the clean energy sector. This has presented historical opportunities to the development of the Group as well as the entire natural gas industry. China Gas plans to further add to the value of the existing gas supply network by boosting the city gas connection rates and increasing the volume of its gas sales. The Group is also striving to further develop its natural gas and LPG businesses in the country by leveraging on its advantages in its management, technologies, capital and brand name, with an aim to generating greater value to society as well as our staff and shareholders”.