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China Eastern sees profit dip
HONG KONG, China (Reuters) -- China Eastern Airlines, China's second largest carrier, said its 2002 net profit plunged 84 percent, well short of forecasts after its 2001 profit was fattened by a one-off tax gain. The Shanghai-based carrier, whose near-term outlook is clouded by the spread of the deadly SARS virus that has led travellers to stay at home, posted earnings of 86.37 million yuan ($10.43 million). That compares with a year-earlier result of 541.7 million yuan. Analysts surveyed by Multex Global Estimates had forecast earnings of 196 million yuan. In 2001, China Eastern's earnings were bolstered by a lower tax rate, which resulted in a tax credit of 306 million yuan. In a results statement issued late on Monday, the company proposed a final dividend of 0.02 yuan per share. Shares of China Eastern closed up 2.2 percent on Monday at HK$0.93, outpacing a 1.58 percent gain in the benchmark Hang Seng Index. The shares have fallen 13 percent in the past 12 months. China Eastern was also hurt by foreign exchange losses as yen strength against the dollar inflated debt repayments. Its 2002 turnover rose to 13.08 billion yuan from 12.15 billion yuan. It carried more passengers and cargo in 2002 than a year earlier. Analysts said the Severe Acute Respiratory Syndrome (SARS) disease could see passenger numbers on China Eastern's more profitable international routes, particularly to Japan and Hong Kong, drop by 30 percent, while traffic on domestic routes could fall by 15 percent. China Eastern's Hong Kong routes made up 55 percent of the carrier's operating profit in 2001 and its March passenger numbers will be closely watched. Rival carrier China Southern Airlines Co Ltd would fare worse because it is based in southern China's Guangzhou where the virus is thought to have originated, Sun Hung Kai Reseach said in a note to clients. Asian carriers have delivered healthy earnings reports but their outlooks are now blighted by the twin threats of the Iraqi war and SARS. Hong Kong's Cathay Pacific Airways Ltd, Dragonair's 43-percent owner China National Aviation Corp, and China Southern all reported 2002 earnings growth over 2001. Passenger traffic in China grew 12 percent in 2002, while cargo traffic rose by 16 percent, defying a global industry slump. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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