The Group is a leading transportation infrastructure group in the PRC and are principally engaged in the infrastructure construction, infrastructure design, dredging businesses.
1Q results for the 3 months ended 31-03-2019. No dividend was declared. (Announcement Date: 29 Apr 2019)
Business Review - For the year ended December 31, 2018
In 2018, with a commitment to the general principle of pursuing progress while ensuring stability, the Company focused on high quality development, adjusted industrial structure and changed development mode, hence achieved continuous improvement of operating results and a good operating quality as a whole.
The value of new contracts entered into by the Group amounted to RMB890,873 million, representing a year-on-year increase of 1.1%. As at 31 December 2018, the backlog of the Group amounted to RMB1,689,738 million.
The value of new contracts from overseas markets of the Group amounted to RMB159,013 million (equivalent to approximately USD23,532 million), representing 18% of the Group’s new contract value and a year-on-year decrease of 26.0% (mainly due to higher base in the corresponding period of last year arising from the Malaysia East Coast Rail Link Project, otherwise representing a yearon- year increase of 12.0%). Of which, 16 projects were entered into with each new contract value over USD300 million and a total contract value of USD12,991 million, accounting for 55% of total value of all overseas new contracts of the Group. According to statistics, as of 31 December 2018, the Company conducted its business in 139 countries and regions, of which a total of 850 foreign contracting engineering projects were under construction, with a total contract amount of approximately USD109,300 million.
The confirmed value of contracts from PPP investment projects of the Group amounted to RMB152,325 million (wherein: the confirmed contract value of share-participation projects on a shareholding pro-rata basis amounted to RMB37,951 million), accounting for 17% of the value of new contracts of the Group, representing a year-on-year decrease of 18.8%; the value of construction and installation contracts to be undertaken by the Group was estimated to be RMB239,714 million.
(I) Domestic Market
In 2018, the economy of China maintained an overall stable development with progress, with a year-on-year growth of 6.6% in GDP, and major indicators were kept within an appropriate range. Fixed assets investment in infrastructure achieved a year-on-year increase of 3.8%, but growth rate dropped significantly as compared with that of the previous year. Wherein, investment in road transport business increased by 8.2%, investment in public facility management business increased by 2.5%, while investment in railway transport business decreased by 5.1%. In the first half, subject to the joint effects of policies on thorough inspection of PPP projects, implementation of financial regulation, tightened regulation on local debt and increased efforts in environmental protection, overall growth rate of investment slowed down; in particular, significant decrease in growth rate of infrastructure investment was observed. In the second half, the government introduced several supporting measures in response to the above: on one hand, exerting greater efforts in improving the weak links in infrastructure investment, issuing special guiding opinions and requiring prevention of radical ups and downs in infrastructure investment, therefore the approvals of infrastructure investment projects in many regions increased significantly; on the other hand, urging local government to expedite the issuance and use of special bonds of local government of RMB1.35 trillion in the year, which has effectively mitigated the issue of insufficient source of funds for upfront infrastructure investment. Since October, growth rate of infrastructure investment started to rebound. In particular, as it was proposed to maintain efforts in improving weak links in infrastructure area at the Central Economic Work Conference at the end of December, the market is expected to rebound for infrastructure investment gradually.
In 2018, with a commitment to the general principle of pursuing progress while ensuring stability and connotative development, the Company achieved stable operations with improvement. As traditional businesses were faced by a grim situation, the Company improved planning and guiding, promoted operations, kept exploring market stock profoundly, consolidated the foundation for development, seized opportunities in “improving weak links” in infrastructure and regional strategic channels as well as port integration, and strived to be a fast follower and a first mover. In addition, the Company achieved improvement in the capacity expansion and efficiency of emerging business and made breakthroughs in rail transit, comprehensive management of river basins and city-related business. In the year, the Company successfully completed a number of projects of great historical significance, including Hainan Project and the construction of Hong Kong-Zhuhai- Macau Bridge. Moreover, the Company, by leveraging its whole industry chain advantage, boosted the coordinated development for the Beijing-Tianjin-Hebei Region, the development of the Yangtze River Economic Belt, and the construction of Guangdong-Hong Kong-Macau Greater Bay Area and coordinated development in other regions. The Company performed its responsibilities in light of implementing the concept of green development, made contributions to building a beautiful China, promoted the implementation of improvement projects of Yongding River, Jin Jiang River, Tuojiang River, etc., and shouldered the responsibility as a pillar of a great power in respect of developing China into a transport power as well as a maritime power, and building a green China.
(II) Overseas Market
In 2018, the Company was committed to jointly deepening the construction and development of the “Belt and Road”, promoting the development of the community with shared future for mankind, building an open world economy, preserving China’s plans, including the multilateral trading system. China’s plans have been widely welcomed by the international community. The trend of economic globalization was irreversible. However, economic globalization hit turbulence, multilateralism received negative impact, international financial market was volatile and Sino-US trade friction was tough and changeable. Uncertainties and risks in international context were increasingly exacerbated.
In 2018, the Company highlighted the power of CCCC as a contributor to global development with win-win actions. The Company was committed to promoting reform precisely and delicately, promoting the construction of the “Belt and Road” in both substance and depth, driving high-dimensional development through high-end connection and high-end operation, and proposed “China’s Plans” and made “China’s Voice” at major diplomatic and business events of the State, such as the Beijing summit meeting of Sino-African Cooperation Forum and the First China International Import Expo (CIIE). The Company was committed to the completion and handing over of several representative projects, including Love-Connection Bridge, Wealth Road, Development Port, Happiness City, the China-Maldives Friendship Bridge, and “Independence Avenue” in Papua New Guinea, and contributed the power of CCCC to the smooth of the global traffic map and local economic and social development. The Company has ranked the third in ENR’s Top International Contractors for three consecutive years, remained the largest international engineering contractor in Asia and ranked the first among the Chinese enterprises for twelve consecutive years, made the “Name Cards of China” famous, such as Road of China, Bridge of China, Port of China, Island of China, City of China and Equipment of China, and redefined the connotation of Infrastructure of China.
Business Outlook - For the year ended December 31, 2018
While China is in the critical stage of restructuring and transformation, the long-term structural contradiction remains acute, and the economy is exposed to downturn pressure. The Central Economic Work Conference set the “six stabilities” as the focus of macro control, rolled out moderate monetary policy and proactive fiscal policy, and made targeted leverage stability and structured de-leveraging as the key task of financial regulation. From a long-term perspective, the country is still and, over a long run, will stay in the period of strategic opportunity, and infrastructure investment is still an important engine of steady growth. In the second half of 2018, a range of policies and measures were announced in succession to boost infrastructure investment and stabilise development; therefore, the focus of infrastructure will shift to inter-city high speed rail, urban rail transit, logistics, municipal facilities, 5G, artificial intelligence, industrial internet and other new infrastructure construction. In the meantime, the country will significantly expand the scale of local government special debts to support key infrastructure projects, increase supply of project land and sea, and offer greater support in environmental impact assessment and other aspects. The transport infrastructure will embrace golden opportunities to improve the weak links.
In the international market, the global economy sees a slower growth, which will lead to the return of trade protectionism and increasing chances of disorderly fluctuations in the financial market. Countries around the globe will show further imbalance in economic growth, inflation, monetary policies and financial market development, and there will be greater risks and uncertainties. However, as the expectations about interest hike announced by the Federal Reserve weakened, emerging economies will be subject to less pressure on capital outflow and currency depreciation in 2019 and will make more infrastructure investment plans. The Second Belt and Road Forum for International Cooperation is approaching and may become an important catalyst of overseas projects.
The Company makes prudential judgement about profound changes in external and internal environment, and predicts that the year of 2019 will show the following market trends: China will make greater efforts to improve infrastructure weak links, due to which, investment and construction of transport infrastructure will be in a large scale. National strategies including Western Development, Beijing-Tianjin-Hebei Coordinated Development, Yangtze River Delta Integration and Guangdong-Hong Kong-Macau Greater Bay Area will be promoted further, and there will be great regional development potential. Investments will thrive as “highway approval authority” will be delegated. Railway construction will be the pioneer of improving weak links, and projects will make great progress. Approval of urban rail transit will be streamlined, which will lead to another round of development opportunities. The ecology and environment market will take up more share in the market as the “Beautiful China” strategy advances. The scale of local government special debts will be expanded, and more financing channels will be developed, which will help transport construction out of financing difficulties. The country will improve policies and service system to support the “going global” strategy, and will strengthen multilateral and bilateral cooperation, connectivity and “Belt and Road” construction, which will bring more market development opportunities.
Faced with complicated domestic and international contexts, the Company will continue to insist on the strategy of “experts in five areas” based on the position of “three roles”, and continue to consolidate and maintain its leading position in traditional business, including port, highway and bridge. In addition, the Company will exert greater efforts in developing and fully enter emerging markets, including rail transit, river basin improvement and airport construction. The Company will seize opportunities, prevent and control risks and proceed steadily, improve investment business, and expedite preferential, high quality and coordinated development of overseas business, so as to move towards a world-class enterprise with global competitiveness.
Source: China Comm Cons (01800) Annual Results Announcement