SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF MARCH, 2003
CHINA SOUTHERN AIRLINES COMPANY LIMITED
(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
BAIYUN INTERNATIONAL AIRPORT
GUANGZHOU, PEOPLE'S REPUBLIC OF CHINA
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.)
Form 20-F. X Form 40-F.
---------- ----------
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes No X
-------- --------
(If "yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- __________.)
China Southern Airlines Company Limited (the "Company") on March 17, 2003
published in two Asian local newspapers its preliminary announcement on the
annual results of the Company for the year ended December 31, 2002 (the
"Announcement") together with a Notice of Annual General Meeting and on March
19, 2003 distributed to local news services a press release (the "Press
Release") showing the highlights of the Announcement. A copy of the
Announcement and the Press Release is included in this Form 6-K of the Company.
China Daily March 17, 2003
CHINA SOUTHERN AIRLINES COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 2002 Annual General Meeting ("AGM") of China
Southern Airlines Company Limited (the "Company") will be held at the Company's
headquarters at the Guangzhou Baiyun International Airport in the PRC at 9:00
a.m. on Tuesday, May 13, 2003 to consider the following businesses:
1. To consider and approve the Report of the Directors for the year 2002;
2. To consider and approve the Report of the Supervisory Committee for the
year 2002;
3. To consider and approve the audited consolidated financial statements for
the year 2002;
4. To consider and approve the reappointment of KPMG as the international
auditors and of KPMG Huazhen as the PRC auditors of the Company for the
year 2003 and to authorise the Board of Directors to determine the
remuneration thereof;
5. To consider and approve the election of directors and resignation of
directors, and authorise the Board of Directors to determine the
directors' remuneration;
6. To consider and approve the extension of time for the validity period of
the resolutions (I) to (VI) passed at the second Extraordinary General
Meeting of the Company of 21 May 2002 in relation to the A Share Issue for
one year from 21 May 2003;
7. To consider and approve the extension of time for the validity period of
the resolution authorizing the Board of Directors to act and deal with all
relevant matters for and on behalf of the Company relating to the A Share
Issue for 1 year from 21 May 2003; and
8. To consider other matters, if any.
By Order of the Board of Directors
Su Liang
Company Secretary
Guangzhou, the PRC
March 14, 2003
Notes:
1. Eligibility for Attending the AGM
Shareholders of the Company who are registered on the registers of
shareholders of the Company at the close of business on April 11, 2003
("Eligible Shareholders") shall have the right to attend the AGM after
completing the required registration procedures.
2. Registration Procedures for Attending the AGM
(i) Eligible Shareholders intending to attend the AGM either in
person or by proxy must deliver to the Company, on or before
April 23, 2003, either in person, by post or by fax, a reply slip
for attending the AGM.
(ii) Holders of H shares of the Company who are Eligible Shareholders
and intend to attend the AGM and be listed on the distribution
list for final dividends must deliver their instruments of
transfer together with the relevant share certificates to Hong
Kong Registrars Limited ("HKRL"), the registrar of H shares of
the Company, at or before 4:00 p.m. on April 11, 2003.
(iii) The register of H shares of the Company will be closed from
April 13, 2003 to May 12, 2003 (both days inclusive), during
which period no transfer of H shares will be registered.
(iv) When attending the AGM, a shareholder or his proxy shall produce
proof of identity. If a corporate shareholder appoints its legal
representative to attend the meeting, such legal representative
shall produce proof of identity together with a notarised copy
of the resolution of the Board of Directors or other governing
body of such shareholder appointing such legal representative to
attend the meeting or letter of authorization.
3. Appointing Proxies
(i) An Eligible Shareholder has the right to appoint one or more
proxies to attend the AGM and vote on his behalf by completing a
form of proxy. A proxy need not be a shareholder.
(ii) A form of proxy shall be used by an Eligible Shareholder or his
attorney to appoint a proxy. If the proxy is appointed by the
shareholders's attorney, the power of attorney or other
authorisation document(s) authorising such attorney to appoint
the proxy must be notarised.
(iii) To be valid, the notarised power of attorney or other
authorisation document(s), together with the proxy form(s), must
be delivered, in the case of holders of domestic-invested shares,
to the Company and, in the case of holders of H shares, to HKRL,
not less than 24 hours before the time designated for the
holding of the AGM.
4. Miscellaneous
(i) The AGM is expected to last not more than one day. Shareholders
who attend shall bear their own travelling and accommodation
expenses.
(ii) Hong Kong Registrars Limited is located at:
Room 1901-5 19th Floor
Hopewell Centre
183 Queen's Road East
Hong Kong
(iii) The registered address of the Company is:
Baiyun International Airport
Guangzhou 510405
PRC
Telephone No.: (*86)20-8612 4738
Facsimile No.: (*86)20-8665 9040
Website: www.cs-air.com
[LOGO]
The Board of Directors of China Southern Airlines Company Limited (the
"Company") is pleased to announce the audited consolidated results of the
Company and its subsidiaries (the "Group") for the year ended 31 December, 2002,
prepared in accordance with International Financial Reporting Standards
("IFRS"), together with the comparative figures for the corresponding period of
2001 as follows:
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2002
vs 2001
For the year ended 31 December, Increase/
2002 2001 2002 2002 (decrease)
Note RMB'000 RMB'000 HK$'000 US$'000 %
Traffic revenue:
Passenger 15,695,622 15,055,496 14,791,841 1,896,225 4.3
Cargo and mail 1,786,270 1,406,036 1,683,413 215,803 27.0
---------- ---------- ---------- ---------
17,481,892 16,461,532 16,475,254 2,112,028 6.2
Other operating revenue 536,728 418,126 505,822 64,843 28.4
---------- ---------- ---------- ---------
Total operating revenue 3 18,018,620 16,879,658 16,981,076 2,176,871 6.7
---------- ---------- ---------- ---------
Operating expenses:
Flight operations 6,732,543 6,905,628 6,344,871 813,374 (2.5)
Maintenance 2,333,419 2,014,579 2,199,057 281,906 15.8
Aircraft and traffic servicing 2,511,284 2,297,521 2,366,680 303,394 9.3
Promotion and sales 1,499,587 1,540,780 1,413,238 181,169 (2.7)
General and administrative 1,060,010 892,233 998,973 128,062 18.8
Depreciation and amortisation 1,839,871 1,814,974 1,733,928 222,279 1.4
Other 15,829 13,270 14,918 1,912 19.3
---------- ---------- ---------- ---------
Total operating expenses 5 15,992,543 15,478,985 15,071,665 1,932,096 3.3
---------- ---------- ---------- ---------
Operating profit 2,026,077 1,400,673 1,909,411 244,775 44.7
---------- ---------- ---------- ---------
Non-operating income/(expenses):
Share of associated
companies' results 36,988 53,077 34,858 4,469 (30.3)
Share of jointly controlled
entities' results (3,352) (4,034) (3,159) (405) (16.9)
Gain/(loss) on sale of fixed assets 4 170,740 (55,889) 160,908 20,627 405.5
Interest income 52,618 49,878 49,588 6,357 5.5
Interest expense 5 (959,193) (933,717) (903,961) (115,882) 2.7
Exchange (loss)/gain, net (175,451) 296,777 (165,348) (21,197) (159.1)
Other, net (9,328) (11,509) (8,789) (1,127) (19.0)
---------- ---------- ---------- ---------
Total net non-operating expenses (886,978) (605,417) (835,903) (107,158) 46.5
---------- ---------- ---------- ---------
Profit before taxation and
minority interests 5 1,139,099 795,256 1,073,508 137,617 43.2
Taxation 6 (398,227) (320,519) (375,296) (48,111) 24.2
---------- ---------- ---------- ---------
Profit before minority interests 740,872 474,737 698,212 89,506 56.1
Minority interests (165,111) (134,512) (155,604) (19,947) 22.7
---------- ---------- ---------- ---------
Profit attributable to shareholders 575,761 340,225 542,608 69,559 69.2
========== ========== ========== =========
Basic earnings per share 7 RMB0.17 RMB0.10 HK$0.16 US$0.021 69.2
========== ========== ========== =========
Notes:
1 COMPANY BACKGROUND
The Company was established in the People's Republic of China (the "PRC",
"China" or the "State") on 25 March, 1995 as a joint stock limited company
as part of the reorganisation of the Company's holding company, China
Southern Air Holding Company ("CSAHC") (formerly named as Southern
Airlines (Group)). CSAHC is a state-owned enterprise under the supervision
of the PRC central government.
The Company's H Shares and American Depositary Shares ("ADS") (each ADS
representing 50 H Shares) are listed on the Stock Exchange of Hong Kong
Limited (the "Hong Kong Stock Exchange") and the New York Stock Exchange,
respectively since July 1997.
2 BASIS OF PREPARATION
The audited consolidated profit and loss account of the Group for the
periods presented include the results of the companies comprising the
Group. All significant intercompany transactions and balances have been
eliminated on consolidation.
The principal accounting policies adopted in the preparation of the
Group's consolidated results for the 2002 financial year are consistent
with those adopted in preparing the Group's consolidated results for the
2001 financial year.
3 TURNOVER
The Group is principally engaged in the provision of passenger, cargo and
mail airline services in the domestic, Hong Kong regional and
international markets, with flights operating primarily from the Guangzhou
Baiyun International Airport which is both the main hub of the Group's
route network and the location of its corporate headquarters.
Turnover comprises revenues from airline and airline-related businesses
and is stated net of sales tax and contributions to the CAAC
Infrastructure Development Fund. The breakdown of the Group's turnover and
operating profit by geographic region for the year is as follows:
Hong Kong
Domestic regional *International Total
RMB'000 RMB'000 RMB'000 RMB'000
2002
Traffic revenue 13,197,589 1,118,695 3,165,608 17,481,892
Other operating revenue 485,046 -- 51,682 536,728
---------- ---------- ---------- ----------
Total turnover 13,682,635 1,118,695 3,217,290 18,018,620
========== ========== ========== ==========
Operating profit 1,614,975 193,440 217,662 2,026,077
========== ========== ========== ==========
2001
Traffic revenue 12,924,892 1,182,492 2,354,148 16,461,532
Other operating revenue 359,895 58,231 -- 418,126
---------- ---------- ---------- ----------
Total turnover 13,284,787 1,240,723 2,354,148 16,879,658
========== ========== ========== ==========
Operating profit 1,090,154 219,686 90,833 1,400,673
========== ========== ========== ==========
* Mainly routes between the PRC and Asian countries, the United States
of America, Netherlands, Australia and Belgium.
4 GAIN/(LOSS) ON SALE OF FIXED ASSETS
Gain/(loss) on sale of fixed assets represents:
2002 2001
Note RMB'000 RMB'000
Aircraft (a) 199,394 59,855
Staff quarters (b) (17,624) (110,723)
Flight equipment and others (11,030) (5,021)
------- -------
170,740 (55,889)
======= =======
(a) Pursuant to certain sale and leaseback arrangements, the Group sold four
Boeing 757-200 aircraft and two Airbus 320-200 aircraft respectively
during 2002 and 2001 to independent third parties and then entered into
operating leases with such parties to lease back the aircraft for a period
of eight to nine years. For the year ended 31 December, 2002, the Group
recognised a profit of RMB199,394,000 (2001: RMB59,855,000), being the
excess of the sale proceeds which approximated the aircraft's fair value
on the date of disposal, over the aircraft's net book value and related
disposal costs.
(b) In accordance with a comprehensive services agreement (the "Services
Agreement") dated 22 May, 1997 between the Company and CSAHC, CSAHC agrees
to provide adequate quarters to eligible employees of the Group as and
when required. In return, the Group agrees to pay a fixed annual fee of
RMB85,000,000 to CSAHC for a ten-year period effective from 1 January,
1995.
During 2002 and 2001, the Group provided additional quarters at its own
expense to certain employees who are not eligible for quarters pursuant to
the Services Agreement. These quarters were provided to the employees in
accordance with the relevant PRC housing reform policy. For the year ended
31 December, 2002, the excess of the cost of these additional quarters
over the considerations received by the Group from the employees of
RMB17,624,000 (2001: RMB110,723,000) was charged to expenses for the year.
5 PROFIT BEFORE TAXATION AND MINORITY INTERESTS
2002 2001
RMB'000 RMB'000
Profit before taxation and minority interests is arrived at after charging:
Operating expenses
Jet fuel 3,519,005 3,548,860
Aircraft maintenance 2,134,705 1,844,836
Routes 4,297,767 4,104,870
Depreciation
- owned assets 1,301,601 1,260,020
- assets held under finance leases 537,692 542,442
Amortisation of deferred expenditure 578 12,512
Operating lease charges
- aircraft and flight equipment 1,416,524 1,912,832
- land and buildings 129,982 91,857
Staff costs
- salaries, wages and welfare 1,538,617 1,272,249
- contributions to retirement schemes 131,622 77,833
Office and administration 452,432 472,613
Other 532,018 338,061
---------- ----------
15,992,543 15,478,985
ANNOUNCEMENT
[LOGO]
CHINA SOUTHERN AIRLINES COMPANY LIMITED
(A joint stock limited company incorporated in the People's Republic of
China with limited liability)
2002 ANNUAL RESULTS
2002 2001
RMB'000 RMB'000
Interest expense
Interest on bank and other loans wholly repayable within five years 335,953 148,554
Interest on other loans 142,679 169,703
Finance charges on obligations under finance leases 544,747 620,687
Less: borrowing costs capitalised (64,186) (5,227)
-------- --------
Net interest expense 959,193 933,717
and after crediting:
Aircraft lease income 46,640 65,486
Amortisation of gains on sale and leaseback transactions 2,579 15,379
Dividend income from unlisted investments 7,116 2,704
======== ========
6 Taxation
Taxation in the consolidated profit and loss account comprises:
2002 2001
RMB'000 RMB'000
PRC income tax 71,651 37,032
Share of taxation of associated companies and
jointly controlled entities 9,424 8,085
------- -------
81,075 45,117
Deferred taxation 317,152 275,402
------- -------
398,227 320,519
======= =======
Pursuant to the income tax rules and regulations of the PRC, the Group is
liable to PRC income tax at a rate of 33%.
In respect of the Group's overseas airline activities, the Group has
either obtained exemptions from overseas taxation pursuant to the
bilateral aviation agreements between the PRC government and the relevant
overseas governments, or has sustained tax losses in these overseas
jurisdictions. Accordingly, no provision for overseas tax has been made
for the years presented.
Deferred tax is provided using the balance sheet liability method on all
temporary differences between the carrying amounts for financial reporting
purposes and the amounts used for taxation purposes, except differences
relating to the initial recognition of assets or liabilities which affect
neither accounting nor taxable profit/loss. The tax value of losses
expected to be available for utilisation against future taxable income is
recognised as a deferred tax asset and offset against the deferred tax
liability attributable to the same legal tax unit and jurisdiction. Net
deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
7 BASIC EARNINGS PER SHARE
The calculation of basic earnings per share is based on the consolidated
profit attributable to shareholders of RMB575,761,000 (2001:
RMB340,225,000) and the weighted average number of shares in issue during
the year of 3,374,178,000 (2001: 3,374,178,000).
8 DIVIDENDS
No interim dividend was paid during the year ended 31 December, 2002
(2001: Nil).
The Board of Directors of the Company does not recommend the payment of a
final dividend in respect of the year ended 31 December, 2002.
A final dividend of RMB0.02 per share totaling RMB67,484,000 in respect of
the previous financial year was approved and paid during the year.
9 Convenient translation
The audited consolidated profit and loss account has been prepared in
Renminbi (RMB), the national currency of the PRC. Translations of amounts
from RMB into Hong Kong dollars (HK$) and United States dollars (US$)
solely for the convenience of readers have been made at the rates of
HK$1.00 to RMB1.0611 and US$1.00 to RMB8.2773, being the average of the
buying and selling rates as quoted by the People's Bank of China at the
close of business on 31 December, 2002. No representation is made that the
RMB amounts could have been or could be converted into HK$ or US$ at these
rates or at any other certain rates on 31 December, 2002 or on any other
date.
REVIEW OF OPERATIONS
The following table sets forth certain financial information and operating data
by geographic region for the years ended 31 December, 2001 and 2002:
2002
vs
2001
For the year ended Increase/
31 December, (decrease)
2002 2001 %
Traffic
Revenue passenger kilometres (RPK) (million)
- Domestic 22,092 19,447 13.6
- Hong Kong regional 1,081 1,060 2.0
- International 5,767 4,550 26.7
------ ------
Total 28,940 25,057 15.5
====== ======
Revenue tonne kilometres (RTK) (million)
- Domestic 2,532 2,217 14.2
- Hong Kong regional 108 105 2.9
- International 974 712 36.8
------ ------
Total 3,614 3,034 19.1
====== ======
Passengers carried (thousand)
- Domestic 18,535 16,499 12.3
- Hong Kong regional 1,369 1,409 (2.8)
- International 1,589 1,213 31.0
------ ------
Total 21,493 19,121 12.4
====== ======
Cargo and mail carried (thousand tonnes)
- Domestic 404 348 16.1
- Hong Kong regional 14 14 --
- International 52 36 44.4
------ ------
Total 470 398 18.1
====== ======
Capacity
Available seat kilometres (ASK) (million)
- Domestic 33,753 31,393 7.5
- Hong Kong regional 1,746 1,690 3.3
- International 8,746 6,981 25.3
------ ------
Total 44,245 40,064 10.4
====== ======
Available tonne kilometres (ATK) (million)
- Domestic 3,924 3,622 8.3
- Hong Kong regional 193 185 4.3
- International 1,798 1,317 36.5
------ ------
Total 5,915 5,124 15.4
====== ======
Load factors
Passenger load factor (RPK/ASK) (%)
- Domestic 65.5 61.9 5.8
- Hong Kong regional 61.9 62.7 (1.3)
- International 65.9 65.2 1.1
Total 65.4 62.5 4.6
====== ======
Overall load factor (RTK/ATK) (%)
- Domestic 64.5 61.2 5.4
- Hong Kong regional 55.8 56.8 (1.8)
- International 54.2 54.1 0.2
61.1 59.2 3.2
====== ======
Yield
Yield per RPK (RMB)
- Domestic 0.55 0.62 (11.3)
- Hong Kong regional 0.98 1.06 (7.5)
- International 0.42 0.41 2.4
0.54 0.60 (10.0)
====== ======
Yield per RTK (RMB)
- Domestic 5.21 5.83 (10.6)
- Hong Kong regional 10.36 11.26 (8.0)
- International 3.25 3.31 (1.8)
4.84 5.43 (10.9)
====== ======
2002 vs 2001
For the year ended Increase/
31 December (decrease)
2002 2001 %
Fleet
Total number of aircraft in service at year end
- Boeing 102 91 12.1
- Airbus 20 20 --
--- ---
Total 122 111 9.9
=== ===
Overall utilisation rate (hours per day)
- Boeing 9.9 9.2 7.6
- Airbus 9.3 8.9 4.5
9.8 9.1 7.7
=== ===
Cost
- Operating cost per ASK (RMB) 0.36 0.39 (7.7)
==== ====
- Operating cost per ATK (RMB) 2.70 3.02 (10.6)
==== ====
The Group recorded a net profit of RMB576 million for 2002, as compared to a net
profit of RMB340 million for 2001. The Group's operating revenue increased by
RMB1,139 million or 6.7% from RMB16,880 million in 2001 to RMB18,019 million in
2002. Passenger load factor increased by 2.9 percentage points from 62.5% in
2001 to 65.4% in 2002. Passenger yield (in passenger revenue per RPK) decreased
by 10.0% from RMB0.60 in 2001 to RMB0.54 in 2002. Average yield (in traffic
revenue per RTK) decreased by 10.9% from RMB5.43 in 2001 to RMB4.84 in 2002.
Operating expenses increased by RMB514 million or 3.3% from RMB15,479 million in
2001 to RMB15,993 million in 2002. As operating revenue increased more than
operating expenses, operating profit increased by 44.7% from RMB1,401 million in
2001 to RMB2,026 million in 2002. The Group's net non-operating expenses
increased by 46.5%, from RMB605 million in 2001 to RMB887 million in 2002,
mainly due to an unfavourable movement in exchange differences of RMB472
million, partly offset by a gain on disposal of four Boeing 757-200 aircraft of
RMB199 million. Overall, the Group's net profit increased by 69.2%, from RMB340
million in 2001 to RMB576 million in 2002.
OPERATING REVENUE
Substantially all of the Group's operating revenue is attributable to its
airline operations. Traffic revenue in 2002 and 2001 accounted for 97.0% and
97.5% respectively of total operating revenue. Passenger revenue and, cargo and
mail revenue accounted for 89.8% and 10.2% respectively of total traffic revenue
in 2002. The balance of the Group's operating revenue is derived from commission
income, income from general aviation operations, fees charged for ground
services rendered to other Chinese airlines that operate flights in and out of
airports in Southern China (including the airports in Guangzhou, Shenzhen,
Xiamen and Wuhan), air catering services and aircraft lease income.
Operating revenue increased by 6.7% from RMB16,880 million in 2001 to RMB18,019
million in 2002. This increase was primarily due to a 4.3% rise in passenger
revenue from RMB15,055 million in 2001 to RMB15,696 million in 2002 due to
higher traffic volume. The total number of passengers carried increased by 12.4%
to 21.49 million passengers in 2002. RPKs increased by 15.5% from 25,057 million
in 2001 to 28,940 million in 2002, primarily as a result of an increase in
passengers carried. However, passenger yield decreased by 10.0% from RMB0.60 in
2001 to RMB0.54 in 2002, mainly as a result of a fall in the average fares
resulting from increased competition.
Domestic passenger revenue, which accounted for 78.0% of total passenger revenue
in 2002, increased by 1.4% from RMB12,068 million in 2001 to RMB12,234 million
in 2002. For the Group's domestic routes, passenger traffic in RPKs increased by
13.6%, while passenger capacity in ASKs increased by 7.5%, resulting in 3.6
percentage points increase in passenger load factor, or an increase of 5.8% from
2001. Passenger yield, however, decreased from RMB0.62 in 2001 to RMB0.55 in
2002 mainly as a result of increased competition among the PRC airlines.
Hong Kong passenger revenue, which accounted for 6.7% of total passenger
revenue, decreased by 6.5% from RMB1,128 million in 2001 to RMB1,055 million in
2002. For Hong Kong flights, passenger traffic in RPKs increased by 2.0%, while
passenger capacity in ASKs increased by 3.3%, resulting in 0.8 percentage point
decrease in passenger load factor, or a decrease of 1.3% from 2001. Passenger
yield decreased from RMB1.06 in 2001 to RMB0.98 in 2002 mainly due to slack in
traffic volume.
International passenger revenue, which accounted for 15.3% of total passenger
revenue, increased by 29.4% from RMB1,860 million in 2001 to RMB2,407 million in
2002. For international flights, passenger traffic in RPKs increased by 26.7%,
while passenger capacity in ASKs increased by 25.3%, resulting in a 0.7
percentage point gain in passenger load factor, or an increase of 1.1% from
2001. Passenger yield increased slightly by 2.4% from RMB0.41 in 2001 to RMB0.42
in 2002.
Cargo and mail revenue, which accounted for 10.2% of the Group's total traffic
revenue and 9.9% of total operating revenue, increased by 27.0% from RMB1,406
million in 2001 to RMB1,786 million in 2002. The increase was primarily due to
the opening of two international cargo routes in 2002.
Other operating revenue increased by 28.4% from RMB418 million in 2001 to RMB537
million in 2002. The increase was primarily due to increase in fees charged for
ground services rendered to other Chinese airlines as the traffic volume
increased as well as an income from a lease arrangement effected during the
year.
OPERATING EXPENSES
Total operating expenses in 2002 amounted to RMB15,993 million, representing an
increase of 3.3% or RMB514 million over 2001, primarily due to the combined
effect of the growth in operations and increase in maintenance expenses. Total
operating expenses as a percentage of total operating revenue decreased from
91.7% in 2001 to 88.76% in 2002 as the increase in operating revenue exceeded
the increase in operating expenses.
Flight operation expenses, which accounted for 42.1% of total operating
expenses, decreased by 2.5% from RMB6,906 million in 2001 to RMB6,733 million in
2002, mainly due to decrease in fuel costs and operating lease rentals. Fuel
costs, which accounted for 52.3% of flight operations expenses decreased by 0.8%
from RMB3,549 million in 2001 to RMB3,519 million in 2002 mainly resulting from
decreased fuel prices. Operating lease rentals decreased by 25.9% from RMB1,913
million in 2001 to RMB1,417 million in 2002, primarily due to the termination of
wet leases of five Boeing 737-300/37K aircraft from Zhongyuan Airlines in
January 2002. Catering expenses increased by 12.8% from RMB554 million in 2001
to RMB625 million in 2002, reflecting primarily an increase in number of
passengers carried. Aircraft insurance costs increased by 108.1% from RMB123
million in 2001 to RMB256 million in 2002, largely due to a rise in the rates of
aircraft insurance premiums subsequent to the 911 incident of the United States.
Labour costs for flight personnel increased by 18.9% from RMB657 million in 2001
to RMB781 million in 2002, largely due to an increase in flight hours as well as
an increase in bonuses for flight personnel.
Maintenance expenses which accounted for 14.6% of total operating expenses,
increased by 15.8% from RMB2,015 million in 2001 to RMB2,333 million in 2002.
The increase was primarily attributable to a 15.7% increase in aircraft
maintenance and repair charges from RMB1,845 million in 2001 to RMB2,135 million
in 2002, mainly as a result of the effect of fleet expansion in recent years and
the growth in operations.
Aircraft and traffic servicing expenses, which accounted for 15.7% of total
operating expenses, increased by 9.3% from RMB2,298 million in 2001 to RMB2,511
million in 2002. The increase primarily resulted from 9.1% rise in landing and
navigation fees from RMB2,157 million in 2001 to RMB2,353 million in 2002, as
the number of flights increased.
Promotional and sales expenses, which accounted for 9.4% of total operating
expenses, decreased by 2.7% from RMB1,541 million in 2001 to RMB1,500 million in
2002. The decrease was due to 15.9% decrease in sale commissions and bonuses
paid to sales agents because of tighter cost controls exercised by the
Group.
General and administrative expenses, which accounted for 6.6% of total
operating expenses, increased by 18.8% from RMB892 million in 2001 to RMB1,060
million in 2002. This was mainly due to an increase in staff salaries and
welfare benefits of 27.8% from RMB439 million in 2001 to RMB561 million in 2002
and increased scale of operations.
Depreciation and amortisation, which accounted for 11.5% of total operating
expenses, increased by 1.4% from RMB1,815 million in 2001 to RMB1,840 million in
2002. This was primarily as a result of the additions of aircraft during
2002.
OPERATING PROFIT
Operating profit increased by 44.7% from RMB1,401 million in 2001 to RMB2,026
million in 2002, as operating revenue increased by RMB1,139 million or 6.7% from
2001, while operating expenses increased by RMB514 million or 3.3% over the same
period.
NON-OPERATING INCOME/(EXPENSES)
Interest expense increased by 2.7% from RMB934 million in 2001 to RMB959 million
in 2002, mainly reflecting the additional bank loans borrowed to finance the
acquisitions of aircraft, partly offset by scheduled debt repayments during the
year.
Interest income increased by 5.5% from RMB50 million in 2001 to RMB53
million in 2002. This was mainly due to an increase in cash balances.
The Group recognised a net gain on sale of fixed assets of RMB171 million in
2002, mainly resulting from disposal of four Boeing 757-200 aircraft.
During 2002, the Group recorded a net exchange loss of RMB175 million
predominantly due to its Japanese yen denominated borrowings as a result of the
Japanese yen appreciation. Such amount comprised mostly unrealised translation
loss.
TAXATION
The Group is subject to PRC income tax at a rate of 33%.
Taxation expense increased by 24.2% from RMB321 million in 2001 to RMB398
million in 2002, reflecting primarily an increase in profit before taxation. A
deferred tax asset of RMB149 million was recognised at 31 December, 2002 in
respect of the unrelieved PRC tax losses brought forward from prior years. Such
tax losses are available for carry-forward to offset against future PRC taxable
profits for a maximum period of 5 years.
MINORITY INTERESTS
Minority interests increased by 22.7% from RMB135 million in 2001 to RMB165
million in 2002, primarily as a result of an increase in net profits of the
Group's airline subsidiaries.
LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE
As at 31 December, 2002, the Group's borrowings totalled RMB19,275
million, representing an increase of RMB4,326 million from RMB14,949 million
last year. Such borrowings were denominated, to a larger extent, in United
States dollars and, to a smaller extent, in Japanese yen and Renminbi, with a
significant portion being fixed interest rate borrowings. Of such borrowings,
RMB6,807 million, RMB2,115 million, RMB2,111 million, RMB2,061 million and
RMB6,181 million will be repayable in 2003, 2004, 2005, 2006, 2007 and
thereafter respectively. As at 31 December, 2002, cash and cash equivalents of
the Group totaling RMB3,771 million, of which 23.7% were denominated in foreign
currencies (mainly in United States dollars), increased by 33.8% from RMB2,819
million last year. Net debts (total borrowings net of cash and cash equivalents)
increased by 27.8% to RMB15,504 million.
As at 31 December, 2002, the Group's shareholders' equity amounted to RMB9,613
million, representing an increase of RMB391 million from RMB9,222 million last
year.
Net debt/equity ratio of the Group at 31 December, 2002 was 1.61 times, as
compared to 1.30 times last year.
FINANCIAL RISK MANAGEMENT POLICY
In the normal course of business, the Group is exposed to fluctuations in
foreign currencies and jet fuel prices. The Group's exposure to foreign
currencies was the result of its having foreign currency debts. Depreciation or
appreciation of the Renminbi against foreign currencies affects the Group's
results significantly because the Group's foreign currency payments generally
exceed its foreign currency receipts. The Group is not able to hedge its foreign
currency exposure effectively other than by retaining its foreign currency
denominated earnings and receipts to the extent permitted by the State
Administration of Foreign Exchange, or subject to certain restrictive
conditions, entering into forward foreign exchange contracts with authorised PRC
banks.
The Group is required to procure a majority of its jet fuel consumption
domestically at PRC spot market prices. There are currently no effective means
available to manage the Group's exposure associated with the fluctuations in
domestic jet fuel prices.
CHARGES ON ASSETS
As at 31 December, 2002, certain aircraft of the Group with an aggregate
carrying value of approximately RMB14,783 million (2001: RMB14,295 million) were
pledged as collateral under certain loan and lease agreements.
COMMITMENTS AND CONTINGENCIES
As at December 31, 2002, the Group had capital commitments of approximately
RMB9,548 million. Of such amounts, RMB5,876 million is related to the
acquisition of aircraft and related flight equipment and RMB3,127 million is
related to the Group's facilities and equipment to be constructed and installed
at the Guangzhou new airport. The remaining amounts of RMB545 million is related
to the Group's other airport and office facilities and equipment, overhaul and
maintenance bases and training facilities. The Group's capital expenditures are
generally subject to receipt of various approvals of the PRC Government and may
be subject to change depending on the timing of such approvals, prevailing
market condition, the availability of financing and other relevant factors.
As at 31 December, 2002, the Group was committed to make a capital contribution
of approximately RMB60 million and RMB201 million to jointly controlled entity
and associated company.
There have been no material changes in the contingent liabilities of the Group
subsequent to 31 December, 2001.
DIVIDENDS
The Company does not recommend the declaration of any dividend for the year
2002.
SHARE CAPITAL STRUCTURE
As at 31 December, 2002, the total share capital of the Company was
3,374,178,000 shares, of which approximately 65.2% (2,200,000,000 state-owned
shares) is held by China Southern Air Holding Company (formerly named as
Southern Airlines Group) ("CSAHC") and approximately 34.8% (1,174,178,000 H
shares) is held by Hong Kong and overseas shareholders.
SUBSTANTIAL SHAREHOLDERS
As at 31 December, 2002, the following shareholders had an interest
of 10% or more in the Company's shares:
Approximate Percentage of the
Name Number of Shares Total Number of Shares
CSAHC 2,200,000,000 65.20%
HKSCC Nominees Limited 1,148,129,999 34.03%
The following persons have informed the Company that the Company's H shares held
by them as at 31 December, 2002 in CCASS's stock accounts of HKSCC Nominees
Limited were more than 10% of the total number of H shares issued by the
Company:
Approximate Percentage of the
Name Number of H Shares Total Number of Shares
The Hongkong and Shanghai
Banking Corporation Limited 643,649,717 54.82%
Standard Chartered Bank 154,060,050 13.12%
Save for the information above, as at 31 December, 2002, the Company is not
aware of any interests which are required to be reported pursuant to Section
16(1) of the Securities (Disclosure of Interests) Ordinance (Chapter 369 of the
Laws of Hong Kong) (the "SDI Ordinance").
PURCHASE, SALE OR REDEMPTION OF SHARES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any
shares of the Company during 2002.
USE OF PROCEEDS FROM H SHARE OFFERING
As stated in the 2001 Annual Report of the Company, as of 31 December, 2001, the
Company had RMB40 million remaining from the proceeds of the Company's initial
public offering. As at 31 December, 2002, the sum of RMB40 million remained
unused.
Consistent with the disclosure in the Prospectus of the Company dated
July, 1997, the Company intends to use the remaining proceeds of RMB40 million
(held as at 31 December, 2002 as short-term deposits with Southern Airlines
Group Finance Company Limited, a PRC authorised financial institution and an
associated company of the Group) for various projects including the development
of the computerised accounting system.
PRE-EMPTIVE RIGHTS
Neither the Articles of Association of the Company nor the laws of the PRC
provide for any pre-emptive rights requiring the Company to offer new shares to
existing shareholders in proportion to their existing shareholdings.
COMPLIANCE WITH THE CODE OF BEST PRACTICE
The Directors of the Company confirm that in the year ended 31 December, 2002,
the Group was in compliance with the Code of Best Practice set out in Appendix
14 to the Main Board Listing Rules of the Stock Exchange of Hong Kong Limited
("the Listing Rules") issued by the Hong Kong Stock Exchange.
DIRECTORS, SUPERVISORS AND SENIOR ADMINISTRATIVE OFFICERS
Directors, Supervisors and Senior Administrative Officers of the Company in 2002
were as follows:
Name Age Position
Yan Zhi Qing 60 Chairman of the Board of Directors
Wang Chang Shun 45 Vice Chairman of the Board of Directors; President
Li Feng Hua 53 Director; Vice President
Wang Shao Xi 61 Director
Zhang Rui Ai 61 Director
Zhou Yong Jin 59 Director
Xu Jie Bo 37 Director; Chief Financial Officer
Wu Rong Nan 61 Director
Simon To 51 Independent Non-Executive Director
Peter Lok 66 Independent Non-Executive Director
Wei Ming Hai 38 Independent Non-Executive Director
Liang Hua Fu 61 Chairman of the Supervisory Committee
Gan Yu Hua 74 Supervisor
Li Qi Hong 55 Supervisor
Jiang Ping 52 Vice President
Li Kun 42 Vice President
Yuan Xin An 46 Vice President
Zheng En Ren 57 Vice President
Yang Guang Hua 49 Vice President
Su Liang 40 Company Secretary
On 12 April, 2002, the Board of Directors by resolutions appointed Mr. Yuan Xin
An, Mr. Zheng En Ren and Mr. Yang Guang Hua respectively as vice president of
the Company.
On 11 October, 2002, Li Feng Hua resigned as the Director and Vice President of
the Company due to work arrangement.
On 14 March, 2003, Mr. Wong Shao Xi and Mr. Zhang Rui Ai tendered their
resignations to the Company as Directors of the Company due to retirement, such
resignation will take effect after approval at the 2002 Annual General Meeting
of the Company.
EQUITY INTERESTS IN THE COMPANY HELD BY THE DIRECTORS AND SUPERVISORS
As at 31 December, 2002, none of the Directors or Supervisors of the Company
held any interest in the Company or any associated corporation of the Company,
which is required to be notified to the Company and the Hong Kong Stock Exchange
pursuant to Section 28 of the SDI Ordinance, or which is required, pursuant to
Section 29 of the SDI Ordinance, to be entered in the register of the Company.
SERVICE CONTRACTS OF THE DIRECTORS AND SUPERVISORS
All Directors and Supervisors of the Company have entered into service contracts
with the Company for a term of three years commencing on 16 April, 2001. Except
for such service contracts, none of the Directors or Supervisors of the Company
has entered or has proposed to enter into any other service contracts with the
Company or its subsidiaries. None of the Directors or Supervisors has entered
into any service contracts with the Company which is not determinable by the
Company within one year without payment of compensation, other than statutory
compensation.
INTERESTS OF THE DIRECTORS AND SUPERVISORS IN CONTRACTS
In 2002, none of the Directors and Supervisors of the Company had a material
interest in any contract of significance to which the Company or any of its
subsidiaries was a party.
DESIGNATED DEPOSITS AND OVERDUE TIME DEPOSITS
As at 31 December, 2002, the Group's deposits placed with financial institutions
or other parties did not include any designated deposits, or overdue time
deposits against which the Group failed to receive repayments.
MATERIAL LITIGATION
The Group was not involved in any material litigation or dispute in 2002.
By Order of the Board of Directors
YAN ZHI QING
Chairman of the Board of
Directors
The annual report of the Group for the year ended 31 December, 2002 containing
all the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the
Listing Rules will be published on the website of the Hong Kong Stock Exchange
in due course
Guangzhou, the PRC
14 March, 2003
[CHINA SOUTHERN LOGO]
Attn: Business Editor
[For Immediate Release]
CHINA SOUTHERN AIRLINES ANNOUNCES 2002 ANNUAL RESULTS
NET PROFIT INCREASED BY 69.2% TO RMB576 MILLION
FINANCIAL HIGHLIGHTS:
- Net profit increased by 69.2% to RMB576 million.
- Operating revenue increased by 6.7% to RMB18,019 million.
- Operating profit increased by 44.7% to RMB2,026 million.
- Basic earnings per share was RMB17 cents. (2001: RMB10 cents)
(Hong Kong, 16 March 2003) - China Southern Airlines Company Limited ("China
Southern Airlines" or the "Company") together with its subsidiaries
(collectively, the "Group") announced the audited consolidated results of the
Group for the year ended 31 December 2002 ("the Year"), prepared in accordance
with International Financial Reporting Standards ("IFRS"). The Group's net
profit increased by 69.2% to RMB576 million; operating revenue increased by 6.7%
to RMB18,019 million; operating profit increased by 44.7% to RMB2,026 million.
Basic earnings per share was RMB17 cents in 2002 as compared with RMB10 cents in
2001. The Board of Directors of the Company did not recommend any final dividend
for year 2002.
The Group's operating revenue was mainly derived from passenger traffic and
cargo and mail traffic. During the Year, the Group's passenger revenue increased
by 4.3% from RMB15,055 million in 2001 to RMB15,696 million in 2002. The total
number of passengers carried increased by 12.4% to 21.49 million passengers.
Revenue passenger kilometres ("RPK") increased by 15.5% to RMB28,940 million;
however, passenger yield decreased by 10.0% to RMB0.54 in 2002, mainly as a
result of a fall in average fares resulted from increased competition. Cargo and
mail revenue increased by 27.0% from RMB1,406 million in 2001 to RMB1,786
million in 2002. The increase was primarily due to the opening of two
international cargo routes in 2002.
The Group's total operating expenses in 2002 amounted to RMB15,993 million,
representing an increase of 3.3%. Flight operation expenses, which accounted for
42.1% of total operating expenses, decreased by 2.5% to RMB6,733 million in
2002, mainly due to decrease in fuel costs and operating lease rentals. During
the Year, fuel costs decreased by 0.8% to RMB3,519 million; operating lease
rentals decreased by 25.9% to RMB1,417 million, primarily due to the termination
of wet leases of five Boeing 737-300/37K aircraft from Zhongyuan Airlines in
January 2002.
China Southern Airlines Announces 2002 Annual Results...P.2
The Company's Chairman Mr. Yan Zhi Qing said, "During the Year, with the PRC
Government's continuing measures to maintain the momentum of economic growth,
the PRC aviation market continued to show steady improvement, as evidenced by a
rise in passenger load factor of the Group. In 2002, with the help of our
hardworking staff, the Company recorded a traffic volume of over 20 million
passengers, and is expected to rank among the world's top 20 passenger airlines.
Although passenger yield has decreased due to intense competition in the
domestic airline industry, the Group imposed stringent cost controls and managed
to record a significant overall operating profit growth."
Regarding the official establishment of China Southern Air Holding Company by
China Southern Airlines' parent company Southern Airlines (Group) jointly with
China Northern Airlines ("Northern Airlines") and Xinjiang Airlines, Mr. Yan
said, "Currently, we are preparing for the injection of the airline businesses
of Northern Airlines and Xinjiang Airlines into our listed company to achieve
economies of scale and enhance the competitiveness of our core business. We have
already entered into revenue sharing agreements with Northern Airlines and
Xinjiang Airlines on jointly operated routes. Since 1 January 2003, the three
airlines have also started a code sharing arrangement, whereby the flight code
of CZ is used for the three airlines' domestic flights. The arrangement is
operating very smoothly at the moment."
"Looking forward, 2003 will be a year of opportunities and challenges for the
PRC aviation industry. The airline assets restructuring of the Group is expected
to provide us with opportunities for network expansion and increase in market
shares. Our objectives are to crystallize development vision for an enterprise
born from joint restructuring, and to integrate the vision into a pragmatic and
innovative corporate culture for our new China Southern Airlines, and to enhance
our overall management quality and to achieve economies of scale at the same
time. This is the goal towards which the Group will strive incessantly." Mr. Yan
concluded.
The Group continues to rank first among Chinese airlines in terms of volume of
passenger traffic, number of scheduled flights per week, number of hours flown,
number of routes and size of aircraft fleet. As at 31 December 2002, the Group
operated 349 routes, of which 286 were domestic routes, 20 were Hong Kong
routes, and 43 were international routes. As at 31 December 2002, the Group
operated 122 aircraft, of which 102 were Boeing and 20 were Airbus aircraft.
-ENDS-
Encl. Audited Consolidated Profit and Loss Account
For enquiries, please contact:
Mr. Su Liang Ms. Christy Lai / Ms. Edith Lui
China Southern Airlines Company Limited Rikes Communications Limited
Tel: (8620) 8621 4738 Tel: (852) 2520 2201
Fax: (8620) 8665 9040 Fax: (852) 2520 2241
E-mail: IR.CZ@cs-air.com
CHINA SOUTHERN AIRLINES COMPANY LIMITED
Audited Consolidated Profit and Loss Account
For the Year ended 31 December 2002
(in accordance with International Financial Reporting Standards)
2002 2001 2002 2002
VS 2001
INCREASE/
RMB'000 RMB'000 HK$'000 (DECREASE)%
Traffic revenue:
Passenger 15,695,622 15,055,496 14,791,841 4.3
Cargo and Mail 1,786,270 1,406,036 1,683,413 27.0
-------------------------------------
17,481,892 16,461,532 16,475,254 6.2
Other operating revenue 536,728 418,126 505,822 28.4
-------------------------------------
Total operating revenue 18,018,620 16,879,658 16,981,076 6.7
-------------------------------------
Operating expenses:
Flight operations 6,732,543 6,905,628 6,344,871 (2.5)
Maintenance 2,333,419 2,014,579 2,199,057 15.8
Aircraft and traffic
servicing 2,511,284 2,297,521 2,366,680 9.3
Promotion and sales 1,499,587 1,540,780 1,413,238 (2.7)
General and administrative 1,060,010 892,233 998,973 18.8
Depreciation and
amortisation 1,839,871 1,814,974 1,733,928 1.4
Other 15,829 13,270 14,918 19.3
-------------------------------------
Total operating expenses 15,992,543 15,478,985 15,071,665 3.3
-------------------------------------
Operating profit 2,026,077 1,400,673 1,909,411 44.7
-------------------------------------
Non-operating income /
(expenses):
Share of associated
companies' results 36,988 53,077 34,858 (30.3)
Share of jointly controlled
entities' results (3,352) (4,034) (3,159) (16.9)
Gain / (loss) on sale of
fixed assets 170,740 (55,889) 160,908 405.5
Interest income 52,618 49,878 49,588 5.5
Interest expense (959,193) (933,717) (903,961) 2.7
Exchange (loss) /gain, net (175,451) 296,777 (165,348) (159.1)
Other, net (9,328) (11,509) (8,789) (19.0)
-------------------------------------
Total net non-operating expenses (886,978) (605,417) (835,903) 46.5
-------------------------------------
Profit before taxation and
minority interests 1,139,099 795,256 1,073,508 43.2
Taxation (398,227) (320,519) (375,296) 24.2
-------------------------------------
Profit before minority interests 740,872 474,737 698,212 56.1
Minority interests (165,111) (134,512) (155,604) 22.7
-------------------------------------
Profit attributable to
shareholders 575,761 340,225 542,608 69.2
-------------------------------------
Basic earnings per share RMB0.17 RMB0.10 HK$0.16 69.2
-------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHINA SOUTHERN AIRLINES COMPANY LIMITED
/s/ Su Liang
By ------------------------------------
Name: Su Liang
Title: Company Secretary
Date: March 19, 2003