Shares of Fortune Oil plc (FTO.L) plunged around 16 percent in the morning trading in London after the UK company focused on the supply of crude oil, transportation fuels and natural gas in China, reported Friday a sharp decline in first-half profit on the absence of prior year's hefty gain, despite higher revenues. The company also warned on Chinese demand.
For the first half, profit attributable to its shareholders fell 96 percent to 8.9 million pounds from 223.2 million pounds last year. Basic earnings per share was 0.36 pence, compared to prior year's 11.73 pence.
The prior year's results benefited by the inclusion of other gains and losses of 214.9 million pounds in respect of gain on disposal of subsidiaries and the gain on revaluation of China Gas Holdings Limited shares on the date of treating CGH as an associate.
The prior year's profit excluding other gain was 8.3 million pounds.
Six-month revenues, including share of jointly controlled entities and associates, rose 28.7 percent to 582.5 million pounds from 452.7 million pounds last year. Group revenues from all operations, excluding jointly controlled entities and associates, increased to 162.6 million pounds from 149.3 million pounds a year ago.
Looking ahead, the company noted that the slow down in China's economic growth is impacting on China's blended energy consumption in the third quarter which increased by only 3.4 percent year on year and was 2.8 percent lower than second quarter indicating a slow down in crude oil demand and associated refined products including petrol and diesel.
Further, China's government raised natural gas prices around 20 percent on September 1 in line with the policy to bring China's natural gas price in line with international market prices. This on-going policy has the potential to adversely impact on the demand for natural gas.
Qian Benyuan, Chairman of Fortune Oil, said, "2014 and 2015 see China moving towards becoming a developed economy, with greater stress on value for money investing, environmental and health protection and lower overall growth rates. …. We continue to monitor the impact of the slow down in China's GDP growth and the recent dramatic decrease in the oil price has increased our inventory risk. At the same time the slowdown in the growth of China's property market will reduce the rate of gas connections and associated fees in city gas concessions. We will therefore be working differently to deliver continued growth within these new constraints."
In London, Fortune shares were losing 1.20 pence or 16.16 percent, and trading at 6.25 pence.
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