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CITIC Limited — Capital/Financing Update 2015
Jul 20, 2015
49082_rns_2015-07-20_ac20419e-760e-426f-845a-694f90bc7726.pdf
Capital/Financing Update
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
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VOLUNTARY ANNOUNCEMENT
RELATED DOCUMENTS OF THE PROPOSED ISSUANCE OF 2015 FIRST TRANCHE MEDIUM-TERM NOTES FILED WITH THE NATIONAL ASSOCIATION OF FINANCIAL MARKET INSTITUTIONAL INVESTORS BY CITIC CORPORATION LIMITED, A WHOLLY OWNED SUBSIDIARY OF CITIC LIMITED
CITIC Corporation Limited (“ CITIC Corporation ”), a wholly-owned subsidiary of CITIC Limited (the “ Company ”, together with its subsidiaries, the “ Group ”), made an application to the National Association of Financial Market Institutional Investors (“ NAFMII ”) of the People’s Republic of China (the “ PRC ”) in July 10, 2015 for the issuance of the 2015 first tranche medium term notes (the “ First Tranche Medium-Term Notes ”).
I. Relevant Status of the First Tranche Medium-Term Notes
Basic Terms: the First Tranche Medium-Term Notes will adopt a fixed interest rate, which shall be determined upon consensus among CITIC Corporation, the lead underwriter and the joint lead underwriter pursuant to the results of book building. The proposed issue amount shall be no more than RMB7 billion and the term of issuance shall be no more than 10 years. The actual issue amount and term of issuance shall be determined upon the official issue.
Information Disclosure Media at the Approval Stage: according to the related guidelines and regulations of NAFMII, the initial draft of the First Tranche Medium-Term Notes has been disclosed on the Debt Capital Market Filing Analysis Notification System of NAFMII (“ DCM-FANS ”) on July 20, 2015. The draft First Tranche Medium-Term Note contains certain information on CITIC Corporation, its subsidiaries and its investee companies which were not previously disclosed. The Company is issuing this voluntary announcement to keep its shareholders and potential investors informed of those information.
II. Initially Disclosed Information on the First Tranche Medium-Term Notes
The Financial Information of the Subsidiaries and Investee Company of CITIC Corporation
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As of March 31, 2015, the total assets, total liabilities and net assets of CITIC Trust Co., Ltd. (“ CITIC Trust ”) were RMB22 billion, RMB3.5 billion and RMB18.6 billion, respectively. Its revenue, profit before income tax, and net profit for the three months ended March 31, 2015 were RMB0.8 billion, RMB0.4 billion and RMB0.3 billion, respectively.
As of December 31, 2014, the total assets, total liabilities and net assets of CITIC Real Estate Co., Ltd. (“ CITIC Real Estate ”) were RMB105.79 billion, RMB93.44 billion, and RMB12.34 billion, respectively. Its revenue, profit before income tax and net profit for the year ended December 31, 2014 were RMB19.33 billion, RMB1.84 billion and RMB0.94 billion, respectively. As of March 31, 2015, the total assets, total liabilities and net assets of CITIC Real Estate were RMB107.68 billion, RMB95.72 billion and RMB11.96 billion, respectively. Its revenue, profit before income tax, and net profit for the three months ended March 31, 2015 were RMB1.25 billion, RMB-0.38 billion, and RMB-0.37 billion, respectively. The net loss recorded for the first quarter of 2015 was mainly caused by the seasonal factors of real estate business settlement.
As of December 31, 2014, the total assets, total liabilities and net assets of CITIC Industrial Investment Group Corp., Ltd. (“ CITIC Industrial Investment ”) were RMB25.203 billion, RMB9.866 billion and RMB15.336 billion, respectively. Its revenue, profit before income tax and net profit for the year ended December 31, 2014 were RMB849 million, RMB3.548 billion and RMB2.936 billion, respectively. As of March 31, 2015, the total assets, total liabilities and net assets of CITIC Industrial Investment were RMB36.252 billion, RMB20.446 billion and RMB15.806 billion, respectively. Its revenue, profit before income tax and net profit for the three months ended March 31, 2015 were RMB4.55 billion, RMB416 million and RMB369 million, respectively. The assets and liability of CITIC Industrial Investment increased substantially on March 31, 2015, which was mainly caused by the inclusion of CITIC Dicastal Co., Ltd. (“ CITIC Dicastal ”) in the consolidated financial statements.
As of December 31, 2014, the total assets, total liabilities and net assets of CITIC Construction Co., Ltd. (“ CITIC Construction ”) were RMB34.352 billion, RMB27.082 billion and RMB7.27 billion, respectively. Its revenue, profit before income tax and net profit for the year ended December 31, 2014 were RMB12.251 billion, RMB2.369 billion and RMB1.704 billion, respectively. As of March 31, 2015, the total assets, total liabilities and net assets of CITIC Construction were RMB34.785 billion, RMB27.293 billion and RMB7.492 billion, respectively. The revenue, profit before income tax and net profit for the three months ended March 31, 2015 were RMB1.861 billion, RMB287 million and RMB203 million, respectively.
As of December 31, 2014, the total assets, total liabilities and net assets of CITIC Metal Co., Ltd. (“ CITIC Metal ”) were RMB16.832 billion, RMB10.585 billion and RMB6.247 billion, respectively. The revenue, profit before income tax and net profit for the year ended December 31, 2014 were RMB17.599 billion, 1.203 billion and 891 million, respectively. As of March 31, 2015, the total assets, total liabilities and net assets of CITIC Metal were RMB16.551 billion, RMB10.274 billion and RMB6.277 billion, respectively. The revenue, profit before income tax and net profit for the three months ended March 31, 2015 were RMB3.555 billion, RMB263 million and RMB204 million, respectively.
CITIC Prudential Life Insurance Co., Ltd. (“ CITIC Prudential ”) is an investee company of CITIC Corporation. As of March 31, 2015, the total assets, total liabilities and net assets of CITIC Prudential were RMB43.316 billion, RMB40.01 billion and RMB3.306 billion, respectively. Its revenue, profit before income tax and net profit for the three months ended March 31, 2015 were RMB2.246 billion, RMB78 million and RMB59 million, respectively.
Business Segments Composition of CITIC Corporation
(1) Revenue of CITIC Corporation by Business Segments (in billions of RMB):
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| Business | For the three months | For the three months | For the year ended | For the year ended | For the year ended | For the year ended | For the year ended | For the year ended |
|---|---|---|---|---|---|---|---|---|
| Segments | ended March 31, 2015 Amount Percentage |
December 31, 2014 Amount Percentage |
December 31, 2013 Amount Percentage |
December 31, 2012 Amount Percentage |
||||
| Financial Services | 42.627 | 71.80% | 133.241 | 50.42% | 111.334 | 33.79% | 95.149 | 31.46% |
| Resources and | ||||||||
| 6.254 | 10.53% | 42.035 | 15.91% | 68.107 | 20.67% | 69.693 | 23.04% | |
| Energy | ||||||||
| Manufacturing | 5.686 | 9.58% | 32.014 | 12.11% | 52.079 | 15.81% | 51.884 | 17.16% |
| Engineering | 2.165 | 3.65% | 13.807 | 5.22% | 17.990 | 5.46% | 16.433 | 5.43% |
| Contracting | ||||||||
| Real Estate and | ||||||||
| 1.570 | 2.64% | 21.935 | 8.30% | 30.862 | 9.37% | 16.842 | 5.57% | |
| Infrastructure | ||||||||
| Others | 1.307 | 2.20% | 20.870 | 7.90% | 51.031 | 15.49% | 54.465 | 18.01% |
| Operation | 0.438 | 0.74% | 1.356 | 0.51% | 1.909 | 0.58% | 3.251 | 1.08% |
| Management | ||||||||
| Elimination | -0.676 | -1.14% | -0.987 | -0.37% | -3.843 | -1.17% | -5.306 | -1.75% |
| Total | 59.371 | 100.00% | 264.271 | 100.00% | 329.469 | 100.00% | 302.411 | 100.00% |
Note:
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The revenue of the Financial Services business of CITIC Corporation equals to the net operating income (e.g. net interest income equals to the difference between interest income and interest expense). Other business mainly consists of information industry, commerce and trade service industry, such as CITIC Press Corporation, CITIC Offshore Helicopter Co., Ltd. (“ COHC ”), CITIC Tourism Group Co., Ltd.
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The operation management mainly reflected the revenue generated from CITIC Corporation Headquarters.
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The revenue of the first quarter of 2015 of CITIC Corporation decreased as compared with the revenue of same period in 2014, and same as the revenue of 2014 to that of 2013, which was mainly attributable to CITIC Pacific Limited, a former subsidiary of CITIC Corporation, no longer consolidated in its financial statements.
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(2) Operating Costs of CITIC Corporation by Business Segments (in billions of RMB):
| Business | For the three | months ended | For the year ended | For the year ended | For the year ended | For the year ended | For the year ended | For the year ended |
|---|---|---|---|---|---|---|---|---|
| Segments | March Amount |
31, 2015 Percentage |
December 31, 2014 Amount Percentage |
December 31, 2013 Amount Percentage |
December 31, 2012 Amount Percentage |
|||
| Resources and | ||||||||
| 5.673 | 40.08% | 39.096 | 36.23% | 65.404 | 34.51% | 66.629 | 37.66% | |
| Energy | ||||||||
| Manufacturing | 4.629 | 32.71% | 26.015 | 24.11% | 45.26 | 23.88% | 45.094 | 25.49% |
| Engineering | 1.939 | 13.70% | 11.617 | 10.77% | 15.985 | 8.43% | 12.87 | 7.27% |
| Contracting | ||||||||
| Real Estate and | ||||||||
| 1.209 | 8.54% | 15.585 | 14.45% | 23.147 | 12.22% | 10.919 | 6.17% | |
| Infrastructure | ||||||||
| Others | 1.094 | 7.73% | 17.373 | 16.10% | 44.001 | 23.22% | 45.108 | 25.50% |
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| Business | For the three | months ended | For the year ended | For the year ended | For the year ended | For the year ended | For the year ended | For the year ended |
|---|---|---|---|---|---|---|---|---|
| Segments | March Amount |
31, 2015 Percentage |
December 31, 2014 Amount Percentage |
December 31, 2013 Amount Percentage |
December 31, 2012 Amount Percentage |
|||
| Operation | - | - | 0.026 | 0.02% | 0.009 | 0.00% | - | - |
| Management | ||||||||
| Elimination | -0.391 | -2.76% | -1.810 | -1.68% | -4.281 | -2.26% | -3.692 | -2.09% |
| Total | 14.153 | 100.00% | 107.902 | 100.00% | 189.525 | 100.00% | 176.928 | 100.00% |
- (3) Gross Profits of CITIC Corporation by Business Segments (in billions of RMB):
| Business Segments | For the three months ended March 31, 2015 |
For the year ended December 31, 2014 |
For the year ended December 31, 2013 |
For the year ended December 31, 2012 |
|---|---|---|---|---|
| Resources and Energy | 0.581 | 2.939 | 2.703 | 3.064 |
| Manufacturing | 1.057 | 5.999 | 6.819 | 6.79 |
| Engineering Contracting | 0.226 | 2.190 | 2.005 | 3.563 |
| Real Estate and Infrastructure | 0.361 | 6.350 | 7.715 | 5.923 |
| Others | 0.213 | 3.497 | 7.03 | 9.357 |
- (4) Gross Profit Margin of CITIC Corporation by Business Segments:
| Business Segments | For the three months ended March 31, 2015 |
For the year ended December 31, 2014 |
For the year ended December 31, 2013 |
For the year ended December 31, 2012 |
|---|---|---|---|---|
| Resources and Energy | 9.29% | 6.99% | 3.97% | 4.40% |
| Manufacturing | 18.59% | 18.74% | 13.09% | 13.09% |
| Engineering Contracting | 10.44% | 15.86% | 11.15% | 21.68% |
| Real Estate and Infrastructure | 22.99% | 28.95% | 25.00% | 35.17% |
| Others | 16.30% | 16.76% | 13.78% | 17.18% |
Information on Certain Business Segments of CITIC Corporation
(1) Financial Services
As of December 31, 2014, e-CITIC, an e-commerce platform of CITIC Group Corporation Limited (“ CITIC Group ”), had an average page view volume of 3.49 million per day. The transactions volume conducted via the “e-bank” system totalled RMB38,110 billion and the volume of online securities trading amounted to RMB7,910 billion.
(2) Resources and Energy
The total amount of platinum sold by China Platinum Company, a subsidiary of CITIC United Asia Investments Limited (“ CITIC United Asia ”), was 32 tons in 2014. The revenue of CITIC United Asia in 2014 was HKD12.99 billion and its net profit HKD0.336 billion.
(3) Engineering Contracting
The main operating income and profit of CITIC Contraction's overseas contracting in 2014 were RMB11.689 billion and RMB1.592 billion, accounting for 96.01% and 98.60% of the main operating income and profit of CITIC Construction respectively.
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(4) Real Estate and Infrastructure
CITIC Real Estate
CITIC Real Estate’s contracted sales in the year of 2014 was RMB20.087 billion, with a sold area of 1.86 million square meters. For the year ended December 31, 2014, CITIC Real Estate’s recognized property sales revenue was RMB18.131 billion, with a recognized sold building area of 1.35 million square meters.
CITIC Real Estate has carried out its business in 29 cities in China. As of December 31, 2014, the total planned construction area of real estate projects both under construction and proposed to be constructed was 19.2684 million square meters, covering Beijing, Tianjin and the Bohai Rim Region, the Pearl River Delta Region, the Yangtze River Delta Region, the Hainan Province Region, Midwest and other regions.
Contracted sales and gross floor area sold by regions in 2014 are set out below (in millions of RMB, in thousand square meters for gross floor area sold):
| Regions | Contracted Sales | Gross Floor Area Sold |
|---|---|---|
| Beijing, Tianjin and the Bohai Rim Region | 2,217 | 180 |
| The Pearl River Delta Region | 13,419 | 1,066 |
| The Yangtze River Delta Region | 410 | 34 |
| The Hainan Province Region | 1,386 | 54 |
| The Midwest and other Regions | 2,654 | 526 |
| Total(note) | 20,087 | 1,860 |
Note: the amounts included in this row have been subject to rounding adjustments, therefore, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.
CITIC Industrial Investment
CITIC Industrial Investment currently operates three highway projects, namely Chongqing section of Chongqing - Guizhou Expressway, Shanghai-Chongqing Expressway (downtown Chongqing - Fuling segment of Chongqing Riverside Expressway) and Chongqing section of Chengdu - Chongqing Expressway. The main operating revenue of these three highway projects in the year of 2014 were RMB513 million, RMB230 million and RMB917 million, respectively.
Financial Information of CITIC Corporation
- (1) The Scope of the Consolidated Financial Statements
The scope of the consolidated financial statements of CITIC Corporation as of March 31, 2015 remained unchanged as compared with that as of December 31, 2014.
- (2) The Status of Interest-bearing Debts
The main borrowings of CITIC Corporation Headquarters as of March 31, 2015 are as follows (in billions of USD):
| Type | Currency | Principal Balance | Value Date | Maturity Date |
|---|---|---|---|---|
| Commercial Borrowing | USD | 0.425 | 2006.12.27 | 2018.12.26 |
| Commercial Borrowing | USD | 0.100 | 2014.02.20 | 2017.02.21 |
| Commercial Borrowing | USD | 1.300 | 2013.09.30 | 2016.09.30 |
| Commercial Borrowing | USD | 0.200 | 2014.01.06 | 2016.09.30 |
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As of March 31, 2015, the contract interest rate of the floating interest borrowings of CITIC Corporation Headquarters ranged from Libor + 1.1% to Libor + 3.0%.
(3) Guarantees Provided
As of December 31, 2014, except for guarantees that have been recognized as liabilities, the amount of guarantees provided by CITIC Corporation was RMB19.203 billion, of which the amount of guarantees provided to third parties was RMB9.832 billion. The guarantees provided by CITIC Corporation to third parties were mainly composed of those provided by its subsidiary CITIC Real Estate for project development loans and mortgage loans of commercial residential buildings purchasers .
(4) Restricted Assets
As of December 31, 2014, CITIC Corporation Headquarters did not have any assets mortgaged, pledged or restricted in use through other arrangements. The material assets of major subsidiaries of CITIC Corporation that were mortgaged, pledged or restricted in use through other arrangements are set out as follows:
| Name | Major subsidiaries’ material assets mortgaged, pledged or restricted in use through other arrangements by the end of year 2014 |
|---|---|
| China CITIC Bank | |
| Corporation Limited | The total value of the financial assets used as collaterals was RMB71.219 billion.1 |
| (“CITIC Bank”) | |
| The total value of the restricted assets was RMB15.178 billion, mainly including | |
| CITIC Real Estate | inventories and fixed assets used as security, pre-selling house payments supervised by |
| the housing administration bureaus , etc. | |
| CITIC Industrial | The value of docks, land, highway toll rights and other assets mortgaged or pledged for |
| Investment | bank loans was RMB8.811 billion. |
| COHC | The total value of helicopters mortgaged for bank loans was RMB1.727 billion. |
| CITIC Resources2 | The value of inventories restricted due to pending litigations was HKD0.979 billion. |
| CITIC Heavy Industries | |
| Co., Ltd. (“CITIC Heavy | The value of assets mortgaged for bank loans was RMB0.373billion. |
| Industries”) | |
| CITIC Dicastal | The value of buildings, land, machinery and equipment and other assets mortgaged for bank loans was RMB0.295 billion. |
| Legend Power Limited3 | The value of buildings and other assets mortgaged for bank loans was RMB0.155 billion. |
Up until now, there has been no major changes in the status of the restricted assets of CITIC Corporation.
1 The assets used as collaterals by CITIC Bank is for the purpose of carrying out its regular banking business.
2 CITIC Resources has noted the announcement dated 15 August 2014 issued by Qingdao Port International Co., Ltd and the announcement dated 27 August 2014 issued by 山煤國際能源集團股份有限公司 (" Shanxi Coal International "), which respectively refer to a legal complaint issued by ABN Bank N.V., Singapore Branch and a claim filed by 山煤煤炭進出口有 限公司 (" Shanxi Coal Import & Export Co., Ltd. "), a wholly-owned subsidiary of Shanxi Coal International, against CITIC Australia Commodity Trading Pty Limited (" CACT ") in China (" the Legal Proceedings "). As at the date of this announcement, CACT has not been served with the Legal Proceedings, so it is not in a position to comment on or evaluate any contents related the Legal Proceedings, and no adjustments has been made in the financials regarding the Legal Proceedings. In order to protect or prevent any unauthorised removal of the inventory from Qing Dao Port, CACT applied to Qingdao Maritime court for asset protection orders regarding the inventory with a book value of HKD0.979 billion. The detail information regarding the Legal Proceedings has been disclosed in the 2014 annual reports of CITIC Limited and CITIC resources.
3 CITIC Corporation holds, directly and indirectly, 100% of the shares of Legend Power Limited.
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(5) Material Investments in Wealth Management Products (“ WMPs ”)
CITIC Corporation invests in low-risk WMPs with stable returns offered by large and medium-sized banks while ensures fund safety and liquidity. All cooperating banks are large and medium-sized banks with solid operating performance. As of March 31, 2015, the total amount of the WMPs held by CITIC Corporation Headquarters was approximately RMB22.750 billion, all of which are short-term with a maturity of less than 12 months and have guaranteed principals or guaranteed returns.
The Credit Facilities of CITIC Corporation
Principal bank credit facilities granted to CITIC Corporation as of March 31, 2015 are set out below (in billions of RMB):
| Name of Bank | Total Amount of Credit Facilities |
|---|---|
| Agricultural Bank of China | 14.00 |
| Industrial and Commercial Bank of China | 9.90 |
| Bank of Communications | 10.00 |
| China Construction Bank | 39.00 |
| Bank of China | 28.10 |
| China Development Bank | 2.60 |
| CITIC Bank Beijing Branch | 2.00 |
| Total | 105.60 |
Note: The credit facilities granted by some of the above banks are shared by both CITIC Group Headquarters and CITIC Corporation Headquarters. In addition, Industrial Bank Co., Ltd. granted an internal fundamental credit facility of RMB35 billion to CITIC Group, which is to be shared by CITIC Group Headquarters and its non-financial subsidiaries. The credit facilities do not necessarily mean that CITIC Corporation will have access to available committed facilities, as the use of the above mentioned credit facilities is to be approved by the relevant commercial banks on a case-by-case basis.
As of March 31, 2015, the total amount of credit facilities granted by the main banks to CITIC Corporation Headquarters was RMB105.6 billion, of which CITIC Corporation Headquarters used RMB14.1 billion and CITIC Group Headquarters and CITIC Corporation Headquarters used RMB17.1 billion, with a balance of RMB88.5 billion.
III. Risks Relating to CITIC Corporation
Risks Relating to Guarantees Provided: as of December 31, 2014, except for guarantees that have been recognized as liabilities, the amount of guarantees provided by CITIC Corporation was RMB19.203 billion, of which the amount of guarantees provided to its related parties and third parties was RMB9.372 billion and RMB9.832 billion, accounting for 3.45% and 3.62% of the owners’ equity attributable to the parent company of CITIC Corporation respectively. Although CITIC Corporation has established a sound internal control system in respect of guarantees and performed its obligations under guarantee contracts, CITIC Corporation may still assume joint liabilities resulting from abnormal situation, material or adverse changes in the financial and operating performance of guaranteed enterprises, or being accused in a joint and several lawsuit, liquidated damages arising from contract disputes, and risks to the business operation of CITIC Corporation.
Risks Relating to WMPs: CITIC Corporation invests in WMPs for improved efficiency in fund use and stable returns while ensures liquidity. As of March 31, 2015, WMPs held by CITIC Corporation Headquarters amounted to approximately RMB22.750 billion in total with a maturity of less than 12 months. CITIC Corporation attaches great importance to risk control, and invests in WMPs offered by its cooperating banks which are large and medium-sized banks with solid operating performance.
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However, the returns of WMPs are subject to uncertainty due to return fluctuations of the underlying investments of WMPs.
Shareholders and investors are reminded that certain financial information included in this announcement are prepared in accordance with the generally accepted accounting principles of the PRC, which may require adjustment during the course of auditing. In addition, the information contained therein is limited solely to the consolidated operation of CITIC Corporation, which does not provide a full picture of the operation status of the Group.
Potential investors and shareholders of the Company are reminded that certain financial information mentioned above has not been reviewed or audited by the Company’s independent auditors. Differences may arise between such financial information and the data disclosed in audited reports due to review and auditing adjustment. Potential investors and shareholders of the Company should exercise caution when dealing with the securities of the Company and should not rely solely on such information.
By Order of the Board CITIC Limited Ricky Choy Wing Kay Tang Zhenyi Joint Company Secretaries
Hong Kong, July 20, 2015
As at the date of this announcement, the executive directors of CITIC Limited are Mr Chang Zhenming (Chairman), Mr Wang Jiong and Mr Zhang Jijing; the non-executive directors of CITIC Limited are Mr Yu Zhensheng, Mr Yang Jinming, Ms Cao Pu, Mr Liu Zhongyuan and Mr Liu Yeqiao; and the independent nonexecutive directors of CITIC Limited are Mr Francis Siu Wai Keung, Dr Xu Jinwu, Mr Anthony Francis Neoh and Ms Lee Boo Jin.
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