“The ironic fact is that in meeting the major milestone of first export shipment our company’s financial results will suffer in the short term,” Chang Zhenming, chairman of the Hong Kong-based company, said in a statement today. “I want to prepare you for these realities.”
Citic Pacific is focusing on increasing production at its Sino Iron project in Western Australia, the single largest foreign resources investment by a Chinese company. It shipped its first concentrate in December. Further spending will be needed to finish the production lines, President Zhang Jijing said today in Hong Kong.
Depreciation and interest expenses will rise significantly this year, in addition to potential impairment pressure, “in the coming years,” Chang said in the statement. “The only remedy for this effect is to scale up production,” he said.
Citic Pacific’s second-half profit more than doubled to HK$3.1 billion ($400 million) in the six months ended Dec. 31, according to Bloomberg calculations based on the company’s full-year results released today. The company declined to confirm the calculations.
The stock fell 1.1 percent to HK$10.48 in Hong Kong trading as at 2:37 p.m. local time, after earlier rising as much as 2.5 percent. Citic Pacific has declined 12 percent this year, exceeding the 4 percent fall in the benchmark Hang Seng index.
Full-year profit rose 9 percent to HK$7.6 billion, Citic Pacific said in the statement, beating the HK$5.8 billion average estimate of three analysts compiled by Bloomberg. Sales decreased 6 percent to HK$88 billion last year.
The full-year loss at its iron ore unit widened to HK$1.6 billion from a loss of HK$781 million a year earlier, Citic Pacific said. Sino Iron is currently operating the first of six production lines. When completed, the project will be able to produce 24 million metric tons of iron ore concentrate annually.
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