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China Jinjiang Environment makes foray into Brazil; Q1 earnings drop 21%

CHINESE waste-to-energy (WTE) operator China Jinjiang Environment has agreed to subscribe for a majority stake in a Brazilian WTE company as it also announced a 21 per cent drop in first-quarter earnings.

The group's net profit for the first three months of 2018 fell to 100.85 million yuan (S$21 million), from 127.45 million yuan a year ago, as gross profit margins slumped due to a large-scale upgrading project for eight of its operational WTE facilities.

Revenue rose 35 per cent to 754.87 million yuan, thanks to a jump in contribution from construction services provided under build-operate-transfer concession agreements.

Jinjiang Environment said that the upgrading project has affected its financial performance in the first quarter due to a reduction in capacity and increase in costs, and this would continue until the end of 2018.

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The upgrading project, expected to be completed in 2019, is currently progressing as scheduled, and the group expects its financial performance to improve as the upgraded plants restart operations in due course, it added.

Separately, Jinjiang Environment said on Sunday that it has agreed to subscribe for 40.3 million new shares in Foxx URE-BA Ambiental Ltda for 38.5 million reais, in cash (about S$14.94 million).

This represents 51 per cent of the enlarged share capital of Foxx URE-BA, making the firm a directly-held subsidiary of Jinjiang Environment following completion of the investment.

The other 49 per cent is held by Foxx Innova Ambiental SA.

Foxx URE-BA will be building and operating a WTE project in Barueri in São Paulo, with a capacity of 825 tonnes a day. This is the first WTE and first public private partnership waste treatment project in Brazil, said Jinjiang Environment.

Jinjiang Environment said that the investment will be paid for by a mix of its internal resources and project finance of 62 million reais provided by International Finance Corporation.

Brazil has an annual waste output of up to 83 million tonnes, and waste generation levels and collection rates are rising.

The country currently mainly uses landfills for waste disposal, and has no WTE facilities, said Jinjiang Environment.

Said its non-executive, non-independent chairman Wang Yuanluo: "The group will uphold high quality standards and efficiency levels, in order to make the Barueri project a landmark project in Brazil and Latin America, kickstart the development of the local WTE industry, raise local standards of sustainable development, and pave the way for the group's success in Brazil and Latin America."