Citic Pacific Ltd.'s (0267.HK) foreign exchange scandal pushed it to a full-year loss of HK$12.66 billion (US$1.62 billion), but the conglomerate says it will return to profitability in 2009.
"Now that we have put the issues of 2008 behind us we are focused on the future," Chairman Larry Yung told a news conference.
"Our balance sheet is solid, with debt maturity well structured in anticipation of cash flows from our businesses," Yung said. But he warned the economic slump will harm Citic Pacific's steel and property operations this year.
Although Yung sought to answer questions about the forex scandal by saying the company had moved past it, an investigation by Hong Kong's Securities and Futures Commission is still under way. Yung said he doesn't know when the probe will be completed, declining further comment.
Citic Pacific, which has power, property, aviation, ore and steel operations, said it swung to a net loss of HK$12.66 billion for the 12 months ended Dec. 31, from a restated net profit of HK$10.84 billion a year earlier.
The company's first-ever annual loss was wider than the average forecast of HK$11.69 billion in a Thomson Reuters survey of three analysts.
J.P. Morgan analyst Billy Ng said he expects Citic Pacific can return to profitability this year, though the aviation and steel businesses will remain under pressure.
"The timing of a recovery in specialty steel is uncertain, and visibilty on the iron ore project remains low," Ng said.
Citic Pacific's shares fell 8% Wednesday, closing at HK$8.96 after partially bouncing back from losses of as much as 10.2% on the day.
Citic Pacific said revenue rose 20% last year to HK$46.42 billion from HK$38.53 billion.
Citic Pacific directors won't get a bonus for 2008 because of the loss, Yung said, and shareholders won't get a dividend.
Citic Pacific disclosed Oct. 20 it faced billions of dollars in losses over what it called unauthorized forex bets by two executives who left the company. The trades were made through an arrangement known as an "accumulator" that gave Citic Pacific limited upside but unlimited downside, and they turned bad when the Australian dollar unexpectedly fell against the U.S. dollar.
Citic Pacific said Wednesday it booked realized and mark-to-market losses of HK$14.63 billion over the bets.
The conglomerate came under intense criticism after it was revealed the board found out about the trades Sept. 7, about six weeks before the disclosure.
Citic Pacific's state-owned parent, Citic Group, ended up taking over most of the currency bets in exchange for a stake in the listed unit.
The timing of the disclosure is believed to be a focus of the SFC investigation, though the SFC and Citic Pacific have declined comment on specifics.
Yung said that the 2008 loss won't force Citic Pacific to sell any assets, but weak demand for iron ore has prompted it to delay the opening of a mine in western Australia by a year, to the third quarter of 2010.
Citic Pacific, which owns 80% of the mine project, said earlier it planned to produce 27.7 million metric tons a year of a mix of ore concentrate and iron pellets. The company acquired the rights to mine 2 billion metric tons of iron ore in Western Australia's Pilbara region in 2006.
Citic Pacific said Wednesday two directors from its parent, Zhang Jijing and Ju Weimin, were named as non-executive directors of the listed company, effective April 1.
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