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Chairman’s Letter to Shareholders
Dear Shareholders,
The global economic uncertainty and volatility I
discussed in my last letter has persisted. Fluctuations
in the price of oil are a case in point. In January, oil
fell to under US$30 a barrel, but by June the price
had climbed to over US$50, and since then prices
have dipped and recovered. The economies of the
United States, Europe and Japan grew in the first half,
but slowly. The unexpected outcome of the Brexit
referendum created further economic uncertainty but
so far Brexit’s effects on countries outside the United
Kingdom, including China and other Asian nations,
have been minimal. We are also keenly watching the
outcome of the US presidential election.
By comparison, the Chinese economy has been
relatively stable as China continued its transition to
a more consumption-led economy. In the first half of
2016, we seized the opportunity to strengthen our
existing consumer business — our majority-owned
subsidiary Dah Chong Hong — by buying Li & Fung’s
consumer and healthcare business covering both
China and Southeast Asia.
We also proceeded with the sale of our mainland
China residential property development business to
China Overseas Land & Investment. In March, I said
this transaction would allow us to focus on what we
do best, which is the development of large integrated
projects. Tax and expenses associated with this sale
were charged to the profits of the first half of 2016,
whereas a profit on the sale will be recorded upon
completion in the second half of this year.
Our company’s profit attributable to ordinary
shareholders for the first six months of 2016 was
HK$20.2 billion, compared with HK$37.7 billion in
the same period last year. Apart from the expenses
related to the property transaction just mentioned,
the year-on-year comparison should be considered
in the context of a gain recognised in 2015 from the
sale of a 3% interest in CITIC Securities, as well as a
reduced shareholding in CITIC Bank. A lower profit
contribution from CITIC Securities also affected our
profitability. In addition, as the vast majority of our
assets are in mainland China the depreciation of the
Renminbi had a carry-over effect on our reporting
currency, which is the Hong Kong dollar.
In June, we raised US$1.25 billion in long-term
US dollar debt in the capital market, thus further
improving our balance sheet. This also lowered our
overall funding cost and optimised our debt maturity
profile. At the end of June, CITIC Limited had more
than HK$21.8 billion in cash and committed facilities,
leaving us with sufficient financial resources and
flexibility to capture business opportunities as they
arise.
The board recommends an interim dividend of
HK$0.10 per share to shareholders.
CITIC LIMITED
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