China Aviation Oil profit crashed 21.7% to $18.51m in Q4

It blamed the expansion of its global trading business that is subject to higher tax rates.

It was a dry fourth quarter for China Aviation Oil (CAO) after its profit fell 21.7% YoY from $23.66m (US$17.9m) to $18.51m (US$14m) due to higher income tax expenses.

PhilipCapital analyst Chen Guangzhi noted the fall in earnings was due to an expansion of the global trading business that is subject to the higher tax rate and the restructuring of Oilhub Korea Yeosu Co Ltd (OKYC) that incurred one-off tax expenses $660,950 (US$0.5m) and provision. “Moving forward, the effective tax rate will be higher in the future with the global footprint continuous to enlarge, comparing to the past when CAO mainly relies on an income stream from China.”

Revenue surged 24% YoY to $5.37b (US$4.06b) in Q4 and 39% YoY to $21.51b ($16.27b) as high oil prices offset a slight decrease in total trading volume of jet fuel and other oil products. Trading volume dipped to 8.2 million tonnes from 8.25 million tonnes last year.

Profit from Pudong arrived at $84.87m (US$64.2m), 5.8% YoY, owing to a 9.8% YoY growth in refuelling volume in 2017 (4.5 million tonnes). Total profits from associates recorded a new high to US$71.5m (7.8% YoY growth) since other associates except CNAF HKR generated double-digit growth of profits. Thought CNAF HKR is still loss-making, the amount of loss decreased by 12.5% YoY to $1.06m (US$0.8m).

CAO’s earnings are expected to rise in the upcoming years thanks to Pudong. Guangzhi noted that in 2017, the respective air traffic and passenger traffic reached 497,000 (up 3.5% YoY) and 70mn (up 6.1% YoY) in SPIA. “We expect to see higher growths of the two traffic volumes this year, attributable to the commencement of the 5th runway. In 2019, the new satellite terminal will provide another 89 to 125 slots when it commerce operations. Hence, we expect Pudong deliver strong earnings growth for CAO in the upcoming years. As of December 2017, CAO held US$300m cash, and management will continue to explore the market and to leverage the fund to incorporate quality assets into the portfolio.”