Looking beyond disappointments

May 25, 2009

, HONG KONG, May 25 – The new chairman of troubled conglomerate Citic Pacific said Monday that the investment firm performed well in the first quarter despite massive losses incurred on forex trades last year.

In his first press conference as chairman, Chang Zhenming would not give specific figures but told reporters that "the disappointment and distraction of the past seven months cannot change what was achieved in the past 20 years."

He said the company\’s cash position for new investments was "sufficient", with 15 billion yuan (2.2 billion US dollars) earmarked for its iron ore and steel businesses.

The company had no plans to raise funds through a share placement, but may consider selling further non-core assets, he said.

However, Chang said the company had no plans to sell Citic Pacific\’s stake in airline Cathay Pacific or its tunnel assets in Hong Kong.

The firm, which has interests ranging from iron ore mines to property, made a net loss of 12.66 billion Hong Kong dollars (1.62 billion US) in 2008 on the back of bad foreign exchange bets, after a 10.84 billion dollar profit in 2007.

It booked a 14.63 billion Hong Kong dollar loss from unauthorised currency trading after bets on the Australian dollar soured when the greenback unexpectedly rose against it.

The incident has sparked an investigation by Hong Kong\’s Securities and Futures Commission into the firm\’s entire board of directors.

Chang, vice-chairman of the China-based parent company Citic Group, blamed the losses on "inadequacies in our internal financial management" and the failure of executive level staff to "fully understand the risks involved."

He said an internal assets and liability committee had been set up to improve risk management.

Chang replaced former chairman Larry Yung, who resigned after a police raid on Citic Pacific\’s headquarters in April following the forex losses.

The company\’s shares touched the 50 Hong Kong dollar mark in October 2007 before plunging 90 percent over the next year.

They are currently trading around the 15-16 dollar mark, having rebounded following Chang\’s appointment.

Yung has since reportedly sold off shares, leaving him with a stake of just under 10 percent. "It is his own personal decision, there is no obligation (for him) to notify us," said Chang of the sale.

Chang said the company\’s steel making and iron ore interests were deemed core parts of the business, and that it was looking to hire a managing director who could help "unite" the company.

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