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.
Wednesday, March 25, 2009
HK's Citic Pacific records $1.6 bln loss in 2008
HONG KONG: Citic Pacific Ltd., the Hong Kong arm of a Chinese government investment firm, said Wednesday it suffered a massive loss last year after making bad currency bets, but maintained its finances were secure.
The company reported 12.7 billion Hong Kong dollars ($1.6 billion) net loss for 2008, compared to a profit of HK$10.8 billion in 2007, the company said in a statement.
Wrongway bets in the currency market were largely to blame, costing the company HK$14.6 billion (US$1.9 billion), according to the statement.
Citic Pacific stunned investors last year when it revealed huge losses from bad bets on leveraged foreign currency contracts, prompting the company to seek a $1.5 billion bailout from its Beijing-based parent company Citic Group.
Chairman Larry Yung expected the impact of the bad currency bets to diminish and said the company would turn a profit this year.
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"We've already put aside provisions from last year for most of the bets, so we think it will be normal profit for us," Yung said at a news conference in Hong Kong.
The vast conglomerate, whose dealings run from airlines to mining and Wal-Mart stores, also said it is "financially secure" following the bailout. However, maturing debt in the next years requires refinancing which will begin shortly, Citic Pacific said in the statement.
The company recommended against a final dividend and directors will not receive bonuses for last year, the statement said.
The company reported 12.7 billion Hong Kong dollars ($1.6 billion) net loss for 2008, compared to a profit of HK$10.8 billion in 2007, the company said in a statement.
Wrongway bets in the currency market were largely to blame, costing the company HK$14.6 billion (US$1.9 billion), according to the statement.
Citic Pacific stunned investors last year when it revealed huge losses from bad bets on leveraged foreign currency contracts, prompting the company to seek a $1.5 billion bailout from its Beijing-based parent company Citic Group.
Chairman Larry Yung expected the impact of the bad currency bets to diminish and said the company would turn a profit this year.
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"We've already put aside provisions from last year for most of the bets, so we think it will be normal profit for us," Yung said at a news conference in Hong Kong.
The vast conglomerate, whose dealings run from airlines to mining and Wal-Mart stores, also said it is "financially secure" following the bailout. However, maturing debt in the next years requires refinancing which will begin shortly, Citic Pacific said in the statement.
The company recommended against a final dividend and directors will not receive bonuses for last year, the statement said.
CITIC Pacific posted its first annual loss in almost two decades after wrong-way bets on the Australian dollar forced it to seek a bailout from China.
et loss was $HK12.7 billion ($2.35 billion), or $HK5.68 a share, for 2008, compared with a profit of $HK10.8 billion, or $HK4.90, a year earlier, the Hong Kong-listed company said yesterday.
That compares with the $HK11.2 billion loss median estimate of five analysts surveyed by Bloomberg.
Sales rose 21 per cent to $HK46.4 billion.
Citic Pacific plunged 81 per cent in 2008, making it the second-worst performing stock on Hong Kong's benchmark index after losses on Australian dollar bets forced it to seek $US1.5 billion ($2.15 billion) of aid from state-owned parent Citic Group.
Citic Pacific said it had a $HK14.6 billion realised and marked-to-market loss after tax on foreign exchange contracts.
"What really matters now is the company's guidance on its underlying businesses, as most of them -- such as aviation and steel production -- are quite cyclical," Billy Ng, a Hong Kong-based analyst at JPMorgan Chase, said before the earnings statement.
"The exchange loss is no surprise and is reflected in the share price."
Citic Pacific, which also develops property, faces dwindling demand because of the global recession. The stock has gained 14.6 per cent this year, compared with the 3.8 per cent drop in the Hang Seng index.
Cathay Pacific, Hong Kong's biggest carrier, which is 17.5 per cent owned by Citic Pacific, on March 11 reported an annual loss of $HK8.56 billion after making wrong bets on fuel prices and as the global recession crimped travel.
Citic Pacific bought currency contracts to fund a $1.6 billion iron ore mine in Australia. The company had expected the Australian dollar would rise, and incurred losses after the currency tumbled against its US counterpart.
Citic Pacific's chairman Larry Yung and managing director Henry Fan were among 17 directors being probed by the Securities and Futures Commission, the company said on January 2. The commission did not say what the probe was about.
The board has been criticised for a six-week delay in revealing the losses by lawmakers and shareholder activist David Webb.
"Investors will need some time to rebuild their confidence in the company," said JPMorgan's Mr Ng, who recommends that investors "underweight" Citic Pacific shares.
According to Citic Pacific's website, the company was listed in 1991 after it bought a 49 per cent stake in Tylfull Company and changed names.
That compares with the $HK11.2 billion loss median estimate of five analysts surveyed by Bloomberg.
Sales rose 21 per cent to $HK46.4 billion.
Citic Pacific plunged 81 per cent in 2008, making it the second-worst performing stock on Hong Kong's benchmark index after losses on Australian dollar bets forced it to seek $US1.5 billion ($2.15 billion) of aid from state-owned parent Citic Group.
Citic Pacific said it had a $HK14.6 billion realised and marked-to-market loss after tax on foreign exchange contracts.
"What really matters now is the company's guidance on its underlying businesses, as most of them -- such as aviation and steel production -- are quite cyclical," Billy Ng, a Hong Kong-based analyst at JPMorgan Chase, said before the earnings statement.
"The exchange loss is no surprise and is reflected in the share price."
Citic Pacific, which also develops property, faces dwindling demand because of the global recession. The stock has gained 14.6 per cent this year, compared with the 3.8 per cent drop in the Hang Seng index.
Cathay Pacific, Hong Kong's biggest carrier, which is 17.5 per cent owned by Citic Pacific, on March 11 reported an annual loss of $HK8.56 billion after making wrong bets on fuel prices and as the global recession crimped travel.
Citic Pacific bought currency contracts to fund a $1.6 billion iron ore mine in Australia. The company had expected the Australian dollar would rise, and incurred losses after the currency tumbled against its US counterpart.
Citic Pacific's chairman Larry Yung and managing director Henry Fan were among 17 directors being probed by the Securities and Futures Commission, the company said on January 2. The commission did not say what the probe was about.
The board has been criticised for a six-week delay in revealing the losses by lawmakers and shareholder activist David Webb.
"Investors will need some time to rebuild their confidence in the company," said JPMorgan's Mr Ng, who recommends that investors "underweight" Citic Pacific shares.
According to Citic Pacific's website, the company was listed in 1991 after it bought a 49 per cent stake in Tylfull Company and changed names.
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