It was once a company with an identity crisis, but Beijing Enterprises Holdings is now showing promise of becoming a powerful infrastructure and public utilities firm. In particular, the strategic acquisition of Beijing Gas Group in June last year appears vindicated as it contributed 66.5 per cent of the total profits. On Thursday, the company reported a 93.7 per cent jump in first-half earnings, which rose to HK$1.27 billion from HK$657 million a year earlier.
Despite the success in the first half of the year, the natural gas business faces considerable challenges, according to Jimmy Tam, financial controller at Beijing Enterprises. He warned: 'The rest of 2008 should be cautious and [we] will endeavour to implement investments already committed.' In this volatile market, even though there are cheap assets to be picked up, Beijing Enterprises will focus on integrating and consolidating all existing businesses before rushing into further acquisitions.
He said the major challenge for management this year would be implementing regional expansion.
Margins would also be depressed in this inflationary environment, and the supply of natural gas would become more expensive, he said.
Beijing Enterprises may not be able to entirely pass on such price increases to its consumers as the government's objective is to keep prices stable.
Mr Tam said that 'inflation may pose some [problems] to the government when it approves tariff hikes'.
