Beijing Enterprises Water Group ((HK:0371)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call of Beijing Enterprises Water Group (BEWG) presented a mixed outlook, reflecting both achievements and challenges. While the company reported an increase in free cash flow and improved dividends, it also faced significant hurdles such as a decline in main business revenue and challenges in overseas projects. The company is strategically shifting towards lighter assets and focusing on operational efficiency to navigate these fiscal challenges.
Increase in Free Cash Flow
BEWG reported a significant increase in free cash flow, registering a net inflow of RMB1.48 billion, marking a 35% increase compared to the previous year. This improvement highlights the company’s focus on enhancing liquidity and financial stability.
Improved Dividend Yield
The company announced an increase in annual dividends by 2.55% compared to 2023, resulting in a dividend yield of around 7%. This reflects BEWG’s commitment to providing value to its shareholders despite the challenging economic environment.
Positive Performance in Water Treatment Services
Revenue from water treatment services saw a 5% increase, with net profit attributable to these services rising by 4% compared to 2023. This growth underscores the company’s strong performance in its core business segment.
Urban Resource Services Growth
BEWG’s urban resource services segment experienced a robust 19% revenue growth compared to the previous year, indicating successful expansion and demand in this area.
Reduction in Capital Expenditure
In line with its strategic shift towards lighter assets, BEWG reduced its capital expenditure by 41% compared to 2023. This move is aimed at improving financial efficiency and reducing the company’s asset-heavy investments.
Decrease in Management and Financial Costs
The company managed to decrease its overheads by 7% and financial expenses by 5% compared to 2023, reflecting its efforts to streamline operations and cut costs.
Decline in Main Business Revenue
Despite the positive developments, BEWG faced a 1% decline in its main business revenue compared to the previous year, highlighting the challenges in maintaining growth across all segments.
Reduction in BOT Construction Revenue
The company’s BOT construction revenue fell by 42% due to a strategic shift away from heavy asset projects, aligning with its focus on lighter asset management.
Challenges in Overseas Projects
Overseas projects maintained revenue levels but experienced a 2 percentage point decrease in gross profit due to exiting high gross margin projects in Portugal, indicating challenges in international markets.
Decrease in Gross Margin for Water Supply Service
The gross margin for water supply services decreased by 5 percentage points, attributed to a shrinking real estate market, which poses a challenge for the company.
Asset Impairment Concerns
BEWG reported an asset impairment of RMB800 million for 2024, with expectations for similar levels in 2025 if local fiscal conditions do not improve, highlighting potential risks to asset valuation.
ESG Rating Downgrade
The company’s ESG rating was downgraded from A to BBB by MSCI, citing increased ESG risk exposure, which could impact investor perception and future investments.
Forward-Looking Guidance
Looking ahead, BEWG’s strategy for 2025 focuses on enhancing cash flow, operational efficiency, and talent development. The company expects revenue growth in its water business by 5%, a 40% decline in construction, and a 5% increase in technical service and machinery sales. These strategic shifts are part of its sustainable development goals, emphasizing lighter asset management and improved ESG efforts.
In summary, Beijing Enterprises Water Group’s earnings call reflected a mixed sentiment, with notable achievements in cash flow and dividends but challenges in revenue and international projects. The company’s strategic focus on lighter assets and operational efficiency aims to navigate these challenges while pursuing sustainable growth.