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To: TobagoJack who wrote (815)	5/6/2003 11:59:46 PM
From: TobagoJack	Read Replies (1) \| Respond to of 867

SARS PLAY: Citic Pacific issues warning (Trade on HKSE finance.yahoo.com ) Wednesday, May 7, 2003 biz.scmp.com DENISE TSANG Citic Pacific yesterday warned that its interim profits would be severely affected by Sars. Managing director Henry Fan Hung-ling said the plunge in revenues at Cathay Pacific Airways and Dragonair, in which the conglomerate is a major shareholder, would have a major impact on earnings. Cathay, which last month issued a profits warning, announced on Monday it was slashing its dividend by 50 per cent. The effects of Sars would also be reflected at its trading subsidiary, Dah Chong Hong, where sales were 10 per cent lower last month year on year and 40 per cent below expectations. The outbreak had sapped demand in core markets in Hong Kong and the mainland for sales of its limousines, cosmetics, foodstuff and apartments, Mr Fan said after the company's annual general meeting yesterday. Sars had caused a sudden and sharp fall in income on an unprecedented scale, which could not be overcome by cost cutting, he said. "Sars makes life much more difficult," he said. "As an example, we have not sold a single Bentley limousine since the new vehicle registration tax was announced on March 5." Citic sold 16 Bentley and Rolls-Royce vehicles last year. Despite the dim outlook, Mr Fan said Citic would seek to maintain ordinary dividends this year following a payout of HK$1 a share and a HK$1 special dividend per share last year. "Our financial position is still solid as we have a combined cash and bank facility of HK$16 billion," he said. "I don't think we will change our policy on ordinary dividend. We will keep distributing dividends if we are able to." The decision by Cathay, which is owned 25.8 per cent by the conglomerate, to halve its dividend means Citic will forego about HK$240 million in dividends. "We support Cathay's decision, it is a victim and needs more cash," Mr Fan said. He said Cathay, Hong Kong's flagship carrier, was carrying a quarter of passengers it had this time last year. Dragonair, which flies mainly on mainland routes, has been particularly hit. To cut costs, Citic is consulting staff members about two options, an early retirement scheme for about 200 staff and a proposed pay cut. "We are a bit worried about the staff's attitude on cutting salaries again because we already did that in January," Mr Fan said, adding that the company would avoid layoffs. Staff costs accounted for 75 per cent of the group's total. Mr Fan, however, was positive that the Sars problem would be solved. "Everyone is in the same boat and should help each other, I don't think there is any problem that can't be solved," he said. Citic had placed a counter-proposal to the Shanghai municipal government about selling back the company's interests in six toll bridges and roads, he said. The blue chip's strategy was to recover a HK$6 billion investment in these projects, he said. "Our principle is that we don't want to incur any losses arising from the sales," Mr Fan said. The company was forced to renegotiate the projects as China has banned infrastructure projects with guaranteed returns. Despite these tough conditions, Citic was seeking new projects in real estate and power generation to boost income, Mr Fan said. The company was in talks to invest in two real estate development projects in Shanghai and a 2 X 600 megawatt power plant extension at Ligang in Jiangsu province, Citic deputy managing director Peter Lee Chung-hing said. Mr Lee said the real estate projects would cost about one billion yuan (about HK$937 million) and the power plant eight billion yuan. Citic had yet to decide on its stake size in the plant.