SINGAPORE (Apr 23): China Jinjiang Environment reported 1Q18 earnings fell 20.9% to RMB 100.8 million ($21.1 million) from RMB 127.4 million in 1Q17 on lower sales and higher cost of sales and finance costs.
Revenue increased by 35.4% to RMB 754.9 million from RM 557.6 million a year ago mainly due to an increase in revenue from the group’s construction services provided under build-operate-transfer (BOT) concession agreements of 664.3% to RMB 268.3 million from RMB 35.1 million previously, which was due to more construction services of waste-to-energy (WTE) facilities in India.
This was however offset by lower revenue contribution from the group’s project technical and management services and EMC business, as well as lower revenue from its WTE business excluding construction services provided under BOT agreements.
However, cost of sales increased significantly by 70.1% to RMB 544.3 million due to an increase in cost of sales in all the group’s business segments despite two of the segments reporting lower revenue contribution.
Hence, gross profit for the quarter came in at RMB 210.6 million, 11.4% lower than RMB 237.7 million in 1Q17.
Other income and other gains was 135.5% higher at RMB 61.5 million from RMB 26.1 million a year ago, due primarily to foreign exchange gains of RMB 42.2 million, arising mainly from money held in USD and income from the disposal of sludge, offset by a decrease in one-time government subsidy.
Finance costs increased by 70.8% to RMB 60.8 million compared to RMB 35.6 million last year, primarily increase in bank borrowings as well as expensing of interest for projects that commenced operations.
During the current quarter, the group recorded share of loss of a joint venture of RMB 17,000, which was absent in previous year.
Wang Yuanluo, non-executive, non-independent chairman of Jinjiang Environment, says, “According to the Chinese government’s 13 th Five-Year Plan, the government has set a target for cities in the PRC to achieve ‘zero landfilling’ of domestic waste in 2020 and for incineration of municipal waste to account for more than 50% of the total municipal waste treatment capacity. In order to better capture this golden industry opportunity, Jinjiang Environment will continue to drive expansion and technical upgrading of its WTE facilities, and accelerate the completion of new facilities."
“In addition, leveraging on its strong technological advantages and solid industry position, the group will continue to actively expand overseas markets such as Southeast Asia, Europe and South America in order to further develop its business and maximise value for its shareholders,” adds Wang.
Separately, the group also announced that it has subscribed for about 40.3 million new shares in Brazil-based WTE company Foxx URE-BA Ambiental for BRL 38.5 million ($14.9 million).
The shares subscribed represents 51.0% of the enlarged capital in Foxx URE-BA. The remaining 49.0% will continue to be held by Foxx Innova Ambiental SA.
Following the completion of the Investment, Foxx URE-BA will be a directly-held subsidiary of Jinjiang Environment.
Foxx URE-BA will construct and operate a WTE project located in Barueri, São Paulo, Brazil with a planned waste treatment capacity of 825 tons per day. This is the first WTE and the first PPP waste treatment project in Brazil.
The group will fund this acquisition via a combination of its internal resources and project finance of BRL 62 million provided by International Finance Corporation.
Commenting on the investment in Brazil, Wang says, “Looking to the future, the Group will continue to take a cue from national environmental policies, leverage on its strong technical support and solid industry position, actively ‘go global’ in our expansion strategy and make further inroads into overseas markets in order to drive the development of the overall business, add value to the community, and create value for shareholders.”
Shares in China Jinjiang last traded at 53 cents on Friday.