Troubled conglomerate Citic Pacific said Wednesday its first-half net profits plunged 43.4 percent because of reduced contributions from its steel investments.

The China-backed company, hit by massive losses from unauthorised
currency trading last year, said profit dropped to 2.47 billion Hong
Kong dollars (317 million US), compared to 4.36 billion dollars for the
first half of 2008.

It said in a statement that the total sales volume of special steel –
bearings and gears — dropped 16 percent from last year because of weak
demand, particularly in overseas markets.

The losses in steel more than offset gains in the firm’s China property investments.

Revenue fell 32 percent to 18.10 billion dollars from 26.67 billion the previous year.

Citic operates three special steel manufacturing plants in mainland
China, producing more than seven million tonnes of the metal a year.

As well as steel production its other major interests are real estate and iron ore mining.

The firm, which sold a 14.5 percent stake in Cathay Pacific to Air
China and Swire Pacific last week, said it would divest resources in
non-core businesses to focus on special steel, iron-ore mining and
China property operations.

“We intended to sell businesses over which Citic Pacific is unable to
exercise management control, which are not significant to the company’s
future or do not generate sufficient profit or cash,” chairman Chang
Zhenming said in the statement.

Chang said its share sale in Cathay generated 7.3 billion dollars to help strengthen its financial position.

The deal enabled Swire to maintain its controlling stake in the Hong
Kong carrier while Air China will boost its own shareholding in it to
29.99 percent.

Citic said last October it faced potential losses of 12.66 billion Hong
Kong dollars from currency contracts betting on the rise of the
Australia dollar to help fund its iron ore projects in that country.

The company came under fire for not disclosing the losses until six weeks after top executives said they became aware of them.

The scandal sparked an investigation of the company by the Hong Kong’s
financial regulators and prompted the resignation of then chairman
Larry Yung.

Source: AFP

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