Citic Profit Misses Estimates Amid Losses From Resources Unit

  • Impairment of HK$12.5 billion declared for iron-ore project
  • Company sold property assets to China Overseas Land this month

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.

Sino Iron

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 non-cash 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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