Less traffic drives down toll profits

China's economic slowdown will remain a key challenge to the shrinking traffic volume on expressways,senior executives of toll-road operator Zhejiang Expressway say.

The average traffic volume is estimated to drop 10 percent for the full year 2008, while the figure dropped 15 percent in July amid macro-economic control measures, the earthquake and traffic diversions from new toll roads, said Jiang Wenyao, deputy general manger of the eastern China-based company.

Zhejiang Expressway posted a 12.3 percent drop in its 2008 first-half net profits, to 1.28 billion yuan, while revenue increased 0.8 percent to 3.41 billion yuan, due to the slowing traffic volume.

The daily average traffic volume in full-trip equivalents along the Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway dropped 5.1 percent to 40,193 per day, and 1.9 percent to 21,265 per day, respectively, after the Hangpu Expressway and the Hangzhou Bay Bridge opened.

"Despite the slowing traffic volume ... I believe our business in the second half will be better than in the first half," Chairman Geng Xiaoping said.

Service area operations, which derive revenue from gas station operations, have served as a new source of income offsetting the adverse effects of declining traffic. The business recorded a 51.4 percent jump in income to 930.2 million yuan.

Meanwhile, its securities companies, in which the company holds a majority of the stakes, have recorded 260 million yuan in profits after deducting the loss of 172.5 million yuan in proprietary securities trading due to the poor market performance. Operating income from the business was 706.5 million yuan.

Despite the poor securities performance, Geng said that the business will remain one of the key driving forces of revenue for the company to diversify its income sources.

The company has considered a spin-off of the securities business to list on the mainland, but nothing has been formalized.

Meanwhile, the plan to introduce foreign strategic investors into the securities company is still in progress.

The company doesn't plan to increase its stakes in its jointly-controlled companies or associate companies.

Source: China Daily