China Everbright Water reports 1H19 net profit rose 13 percent

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China Everbright Water reported Tuesday its first half net profit rose 13 percent on-year to HK$420.49 million (S$74.41 million or US$53.59 million) on more higher margin projects.

Revenue for the six months ended 30 June was HK$2.49 billion, up 5 percent on-year, the company said in a filing to SGX.

The gross profit margin was 37 percent for the first half, up 4 percentage points on-year, the filing said.

“The increase was mainly due to a lower portion of construction revenue and construction contract revenue and technical service income recognized in the mix of the total revenue of the first half of 2019 as compared to the corresponding period of last year,” China Everbright Water said. “In general, construction services and construction contract and technical services have a lower gross profit margin than operation services.”

Operation income from service concession arrangements increased by 16 percent on-year to HK$697.02 million, on the beginning of operation for new projects and tariff hikes for several projects, the filing said.

Operation income from reusable water supply services rose 2.03 percent on-year to HK$15.72 million, the filing said.

Construction service revenue from service concession arrangements rose 6.68 percent to HK$1.32 billion, the filing said.

During the first half, China Everbright Water expanded to Zhejiang Province by obtaining its first drinking water sources wetland protection project, and the company strengthened its market presence in Shandong, Jiangsu, Hubei and Liaoning Provinces, the filing said.

The group obtained 11 environmental projects and signed a supplementary agreement for an existing project during the first half, with projects including six waste-water treatment projects, three reusable water projects, one water supply project and one waste-water pipeline network project, the filing said.

China Everbright Water posted its second quarter net profit increased 11 percent on-year to HK$214.14 million, while revenue for the quarter ended 30 June fell 11 percent on-year to HK$1.17 billion.

The company declared an interim dividend of 3.74 Hong Kong cents, or around 0.65 Singapore cent, compared with 0.49 Singapore cent in the year-ago period.

In its outlook, China Everbright Water pointed to the Chinese government’s goals in areas such as treatment of black and odorous water bodies and waste-water treatment, which were targeted for 2020.

“With less than two years left, the tasks remain arduous and urgent. This will allow capable, responsible and accountable companies to further outperform their peers,” the filing said.

“Separately, as traditional areas in the water industry have become more mature, areas such as industrial waste water treatment, sludge harmless treatment, water plant and pipeline integration, and the mixed-ownership reform of the local state-owned water enterprises are expected to become new development trends, which are expected to continue unleashing the industry’s potential for growth,” it added.

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