China Southern Airlines Company Limited Third Quarterly Report of 2004.HONG KONG Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. -- China Southern Airlines China Southern Airlines (中国南方航空公司) (SEHK: 1055, NYSE: ZNH) is an airline based in Guangzhou in the Guangdong province of the People's Republic of China. Company Limited (NYSE NYSE See: New York Stock Exchange :ZNH ZNH Zora Neale Hurston (author and anthropologist, 1891-1960) ) (HKSE HKSE Hong Kong Stock Exchange :1055)(SHA SHA - Secure Hash Algorithm :600029): The Stock Exchange of Hong Kong Stock Exchange of Hong Kong (SEHK) Only stock exchange located in Hong Kong. Limited takes no responsibility for the content of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever how·so·ev·er adv. 1. To whatever degree or extent. 2. By whatever means. arising from or in reliance upon the whole or any part of the content of this announcement.
CHINA SOUTHERN AIRLINES COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic
of China with limited liability) (Stock Code: 1055)
THIRD QUARTERLY REPORT OF 2004
SUMMARY
The unaudited financial statements of the Company for the Third
Quarterly Report were prepared in accordance with the PRC GAAP.
This announcement is made by the Company pursuant to Rule 13.09 of
the Listing Rules.
1. IMPORTANT NOTICE This announcement is made by China Southern Airlines Company Limited (the "Company") pursuant to Rule 13.09 of the Rules Governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). The Directors of the Company collectively and individually warrant that the information set out in this report does not contain any misrepresentation misrepresentation In law, any false or misleading expression of fact, usually with the intent to deceive or defraud. It most commonly occurs in insurance and real-estate contracts. False advertising may also constitute misrepresentation. , misleading statement or material omission omission n. 1) failure to perform an act agreed to, where there is a duty to an individual or the public to act (including omitting to take care) or is required by law. Such an omission may give rise to a lawsuit in the same way as a negligent or improper act. ; and jointly and severally Jointly and Severally 1. A legal term describing a partnership in which individual decisions are bound to all parties involved and thus undivided. 2. A term used in underwriting syndicates to refer to the distinct responsibility of individual companies to sell a certain accept full responsibility as to the truthfulness, accuracy and completeness of the content herein. The third quarterly report of the Company for the year 2004 (the "Third Quarterly Report") was prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the relevant rules and regulations of the China Securities Regulatory Commission The China Securities Regulatory Commission (CSRC) (Simplified Chinese: 中国证券监督管理委员会; Pinyin: . The unaudited financial statements of the Company for the Third Quarterly Report were prepared in accordance with the accounting rules and regulations of the People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China ("PRC GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). Mr. Yan Zhi zhi (dzē), n 1. one of the five spirits, zhi is housed by the kidney and corresponds to will, determination, and drive; long-term memory; and information storage. 2. Qing (Chairman), Mr. Xu Jie Bo (Chief of Accounting Work, Chief Financial Officer and Vice President) and Mr. Xiao xiao or hsiao (Chinese; “filial piety”) In Confucianism, the attitude of obedience, devotion, and care toward one's parents and other elders considered fundamental to moral conduct. Li Xin Li Xin (李歆) (d. 420), courtesy name Shiye (士業), nickname Tongzhui (桐椎), was a duke of the Chinese state Western Liáng. (Chief of Accounting Department and General Manager of the Financial Department) of the Company, warrant that the Third Quarterly Report is true and complete.
2. BASIC PARTICULARS OF THE COMPANY
2.1 Basic Information of the Company
Stock abbreviation: China Southern
Stock code: 600029 (A share), 1055 (H share), ZNH (ADs)
Company Secretary: Su Liang
Securities Representative: Lei Bin
Correspondence Address: No. 278 Ji Chang Road, Guangzhou,
Guangdong Province, People's Republic of
China
Telephone: 020-86124737
Facsimile: 020-86659040
e-mail address: ir.cz@cs-air.com
2.2 Financial Information
2.2.1 Major Accounting Data and Financial Indices
As at As at
30 September 31 December
2004 2003 Change
(%)
Total assets (RMB'000) 45,676,650 39,372,204 16.01
Shareholders' equity (excluding
minority interests) (RMB'000) 12,091,051 11,549,849 4.69
Net assets per share (RMB) 2.76 2.64 4.69
Adjusted net assets per share (RMB) 2.70 2.59 4.24
For the For the
period from period from
1 July 2004 to 1 January to
30 September 30 September
2004 2004 Change
(%)
Net cash outflow from
operating activities (RMB'000) 2,052,028 3,565,661 37.04
Earnings per share (RMB) 0.048 0.124 -47.13
Return on net assets 1.76% 4.58% -50.40
Return on net assets after
extraordinary gains and losses 1.70% 4.35% -52.73
Amount
Extraordinary (gains)/losses (RMB'000)
Net gain on disposal of fixed assets 1,941
Net gain from expired air tickets 59,561
Others -29,290
Effect of the above on taxation -4,832
Total 27,380
2.2.2. Profit and Loss Account
July - September, July - September,
2004 2003
Consolidated Consolidated
The Company The Company
RMB'000 RMB'000 RMB'000 RMB'000
Revenue from principal
operations 6,732,982 4,646,062 4,992,022 3,367,037
Less: Transfer to CAAC
Infrastructure
Development Fund - - - -
Net Revenue from principal
operations 6,732,982 4,646,062 4,992,022 3,367,037
Less: Operating costs
of principal
operations 5,246,495 3,789,137 3,427,771 2,305,797
Business taxes and
surcharges 189,135 124,661 14,216 12,578
Profit from principal
operations 1,297,352 732,264 1,550,035 1,048,662
Add: Profit from other
operations 11,171 37,362 132,566 98,060
Less: Selling expenses 565,822 417,153 436,369 332,261
General and
administration
expenses 311,816 191,305 210,222 171,359
Finance expenses 100,443 78,901 360,072 338,400
Operating profit 330,442 82,267 675,938 304,702
Add: Investment income 14,146 122,786 52,145 291,381
Non-operating
income 21,653 19,058 2,141 1,949
Less: Non-operating
expenses 12,779 4,836 8,442 5,668
Profit before income tax 353,462 219,275 721,782 592,364
Less: Income tax 71,994 11,152 222,731 210,548
Minority interests 73,345 - 117,235 -
Net Profit 208,123 208,123 381,816 381,816
January - September, January - September,
2004 2003
Consolidated Consolidated
The Company The Company
RMB'000 RMB'000 RMB'000 RMB'000
Revenue from principal
operations 17,899,974 12,361,470 11,965,102 8,213,798
Less: Transfer to CAAC
Infrastructure
Development Fund - - 250,788 167,942
Net Revenue from principal
operations 17,899,974 12,361,470 11,714,314 8,045,856
Less: Operating costs
of principal
operations 14,022,143 10,017,460 10,208,129 7,267,705
Business taxes and
surcharges 507,387 332,318 203,518 140,178
Profit from principal
operations 3,370,444 2,011,692 1,302,667 637,973
Add: Profit from other
operations 105,674 102,720 220,509 205,285
Less: Selling expenses 1,435,489 1,048,350 1,081,544 802,825
General and
administration
expenses 789,643 465,197 710,386 475,730
Finance expenses 431,880 356,400 814,153 746,003
Operating profit 819,106 244,465 -1,082,907 -1,181,300
Add: Investment income 42,965 294,453 40,343 65,232
Non-operating
income 70,002 62,666 6,818 4,559
Less: Non-operating
expenses 37,790 12,288 38,675 7,459
Profit before income tax 894,283 589,296 -1,074,421 -1,118,968
Less: Income tax 160,020 48,094 -321,758 -336,027
Minority interests 193,061 - 30,278 -
Net Profit 541,202 541,202 -782,941 -782,941
2.3 As at the end of the reporting period, the Company had a total
number of 143,081 shareholders
Number of
shares held
as at
30 September Type of
Name of shareholder 2004 shareholder
HKSCC Nominees Limited 1,151,421,998 H shares
China Merchants Bank Shareholders Co., Ltd.
- CITIC Classic Allocation Fund 30,530,879 A shares
Yin Feng Securities Investment Fund 23,143,201 A shares
The Bank of Communication - Efund 50 Index
Fund 21,824,754 A shares
China Construction Bank - Fortune SGAM
Multi-Strategy Growth Investment Fund 18,250,687 A shares
Boshi Value Growth Securities Investment Fund 18,000,000 A shares
Industry and Commerce Bank of China - Galaxy Yintai
Financial Management Dividends Distribution
Fund 14,890,171 A shares
China Bank - China AMC Return Fund 14,213,100 A shares
Xin Hua Securities Investment Fund 13,880,000 A shares
The Bank of Communication - Rongtong Industries
Prosperity Securities Investment Fund 13,354,750 A shares
3. MANAGEMENT DISCUSSION AND ANALYSIS --3.1Brief analysis of the Company's overall operational activities during the reporting period During the reporting period, the domestic aviation market benefited from the continuing steady development in China's economy and the increase in domestic consumption level, which resulted in a strong demand for air transportation. For the third quarter of 2004, our aviation transportation business maintained a good trend of growth. All production indices were higher as compared to the same period of last year. However, the sustained high fuel price, which might climb even higher, contributed to the high jet fuel costs borne by the Company. The Company's total traffic volume was 1,270.78 million tonne-kilometers, representing a growth of 26.06% over the same period of last year; passengers carried were 77,202,900, representing an increase of 24.88% from the same period last year; cargo and mail traffic amounted to 141,100 tonne tonne measure of weight or mass; 1 tonne=1000 kg. See also ton. , representing an increase of 16.61% from the same period last year. Meanwhile, the revenues and profits from our principal operations were RMB RMB Right Mouse Button RMB Regional Management Board (USACE) RMB Rolf Maier Bode (musician, band) RMB Ren Min Bi (currency of People's Republic of China) 6,732,982,000 which is an increase of 34.87% from the same period last year, and RMB1,297,352,000 which is a decrease of 16.3% from the same period last year respectively. The decrease in profits from principal operations was mainly due to the combined effect of a 60% increase of jet fuel costs as compared to the same period last year, the reduction of sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. and the waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. of the levies of CAAC CAAC Civil Aviation Administration of China CAAC Civilian Agency Acquisition Council CAAC Capital Area Activities Conference (Lansing, Michigan, USA) CAAC Clean Air Action Corporation CAAC Citizens' Action Against Crime Infrastructure Development Fund in the same period of last year. As a result, the net profit for the third quarter of this year dropped by RMB381,816,000, or 45.49%, from the same period of last year to RMB208,123,000. For the period of January January: see month. to September September: see month. 2004, the Company's total traffic volume was 3,456.29 million tonne-kilometers, representing a growth of 39.6% over the same period of last year; passengers carried were 210,346,200, an increase of 51.1% from the same period of last year; cargo and mail traffic was 4,079,200 tonne, representing an increase of 25% over the same period of last year; passenger load factor was 69.3%, an increase of 9.9% over the same period of last year. For the period of January to September 2004, the accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. revenues from our principal operations were RMB17,899,974,000, representing a rise of 49.6% over the same period of last year; accumulated profits from our principal operations were RMB3,370,444,000, an increase of 158.73% over the same period of last year. The net profit for the period of January to September of this year was RMB541,202,000, as compared to a net loss of RMB782,941,000 for the same period of last year.
3.1.1 Principal operations or products representing more than 10%
of the income or profit from the Company's principal
operations
Gross profit
Principal Operation Income Costs margin
(by business or product) (RMB'000) (RMB'000) (%)
Income from passenger
transportation 16,049,352
Income from cargo and mail
transportation 1,673,331 14,022,143 21.66
Others 177,291
--3.1.2Analysis of significant events and their impact and solutions As disclosed in an announcement of the Company dated 26 July July: see month. , 2004, in order to enhance the efficiency of the Company's capital utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be and hence its investment return and profit, the Company entered into an asset management agreement with Zhong Zhong can refer to
n a Chinese term for an acupuncture diagnosis achieved by thoroughly examining and interviewing a patient. Wei Wei, river, China Wei (wā), river, c.450 mi (720 km) long, rising in SE Gansu prov. and flowing E through Gansu and Shaanxi provs. to the Huang He. Ye Investment Co., Ltd ("Zhong Zheng") and Centergate Securities Co., Ltd ("Centergate") on 22 July, 2004. Pursuant to the asset management agreement, each of the Company and Zhong Zheng jointly appointed Centergate to manage and invest an aggregate investment sum contributed as to RMB500 million by the Company and as to RMB75 million by Zhong Zheng respectively. The appointment is effective from 27 July, 2004 to 26 July, 2005. If the annual rate of return from investment is 6% or below, Centergate will not charge any assets management fee. If the annual rate of return from investment exceeds 6%, Centergate will charge an assets management fee equivalent to a sum which is less than 60% of the excess of 6% annual return from investment of the Company's capital. The Board has approved the asset management agreement by way of a written approval in accordance with the articles of association of the Company and the laws of PRC. --3.1.3Alert on expected significant change in net profit The outbreak outbreak see epidemic. of SARS from April to June June: see month. of 2003 in China caused an unprecedented adverse impact to the business of the Company, as a result the Company recorded an accumulated net loss for January to September of 2003. In 2004, the continued improvement in domestic economy and consumer consumption level in China stimulated the growth of the domestic civil aviation industry, therefore the total traffic volume of the Company rose as compared to the same period of last year. It is expected that the accumulated net profit of the Company for January to December December: see month. 2004 will increase substantially by over 50 per cent as compared with the same period of 2003.
By order of the Board
China Southern Airline Company Limited
Yan Zhi Qing
Director
Guangzhou, the People's Republic of China
October 26, 2004
As at the date of this announcement, the Directors of the Company
are Yan Zhi Qing, Liu Ming Qi, Wang Chang Shun, Peng An Fa, Wang Quan
Hua, Zhao Liu An, Zhou Yong Qian, Zhou Yong Jin, Xu Jie Bo and Wu Rong
Nan as executive Directors and Simon To, Peter Lok, Wei Ming Hai, Wang
Zhi and Sui Guang Jun as independent non-executive Directors.
"Please also refer to the published version of this announcement in
China Daily."
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