16th Mar 2015 09:31
LONDON (Alliance News) - China Chaintek United Co Ltd Monday said its pretax profit rose during 2014, but warned that profit will halve in 2015 as revenue is hit by the Chinese government pushes manufacturers to change the way they operate.
The company, which provides domestic logistics services to consumer goods manufacturers in China, said that although its pretax profit and revenue rose in 2014, it is expecting revenue to fall by 35% in 2015, leading to pretax profit falling by 50%.
"The board considers that revenues for the current year are likely to be approximately 35% down on 2014 and profits before tax approximately 50% lower than those for 2014," said Chief Executive Meijin Xu.
"The macro economic slowdown in the (Chinese) economy is resulting in structural changes which are impacting both manufacturers and, in the near term, Chaintek," added Non-Executive Chairman William Knight.
China Chaintek reported a pretax profit of CNY287.3 million for the year ended December 31, up from CNY284.9 million a year earlier.
Pretax profit rose after revenue climbed to CNY363.7 million in the period from CNY350.6 million, partially offset by distribution and administrative expenses rising.
At the end of December, China Chaintek reported a cash balance of CNY472.2 million, up from the CNY318.3 million it had in the bank at the end of December 2013.
China Chaintek maintained its final dividend at 4.0 pence per share, which will be by way of a scrip dividend, giving a total dividend of 6.0 pence per share for the financial year.
The profit warning is a result of manufacturers in China switching from a traditional model of producing large volumes sold over a lengthy period with promotions and discounting, to one that produces more innovative designs to meet customer demand and capable of shorter production runs requiring timely and efficient delivery, China Chaintek said.
"This process is being encouraged by the central government. During the period while manufacturers implement these changes, they expect their volumes to fall significantly," the company said in a statement.
China Chaintek also said fuel costs in China will fall a further 10% in 2015, which will hit revenue from its logistics services division by the same amount in 2015.
China Chaintek shares were trading flat on Monday morning at 35.00 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
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