Swire posts 65% H1 profit fall, hit by Cathay loss
Updated: 2012-08-11 06:47
By Sophie He(HK Edition)
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Martin Cubbon, chief executive officer of Swire Properties Ltd, attends a news conference on Friday in Hong Kong. The company reported a 65% profit fall in H1, dragged down by its affiliate Cathay Pacific Airways. Jerome Favre / Bloomberg |
Swire Pacific Ltd, an aviation-to-real estate conglomerate, said on Friday that it expects better performance in the second half, after reporting a 65 percent profit fall in the first half, dragged down by losses at its affiliate Cathay Pacific Airways Ltd.
"We are anticipating a stronger second half, (and) there are various reasons for that (anticipation)," said Christopher Pratt, chairman of the group, in Hong Kong on Friday, explaining that one of the reasons is that Cathay Pacific's worse-than-expected first half results was affected by seasonal factors and the conditions will be improved with expected increased business travel in October and November.
Hurt by high fuel costs, weak cargo demand and fewer premium passengers, Cathay Pacific posted a net loss of HK$935 million in the first half of 2012 on Wednesday, compared to the HK$2.81 billion profit in the previous corresponding period, which is the company's worst first-half loss since 2003.
Swire Pacific said its net profit for the six months ended June 30 fell 64.7 percent to HK$8.44 billion from HK$23.95 billion a year earlier. Underlying profit also plunged 51 percent to HK$2.26 billion from HK$4.6 billion, while its revenue rose 14 percent to HK$19.39 billion from HK$17.08 billion.
Swire Properties, the Hong Kong commercial landlord which spun off from Swire Pacific in January, said its underlying profit rose 3.8 percent in the first half on rental income growth from its office and shopping malls in the city and the mainland. Its net profit dropped 50.7 percent due to real estate revaluation.
Pratt believes that Swire Properties, in which Swire Pacific now holds 82 percent, is heading to a better second half too, as its overall occupancy rate is high and the rental reversion is positive.
Martin Cubbon, chief executive of Swire Properties, said that the occupancy for its office portfolio in Hong Kong is as high as 98 percent.
Cubbon mentioned although the demand office space in Central has softened, and the market rate has dropped 10 to 15 percent in the past 12 months, the office rentals at Pacific Place and Island East will be resilient due to limited supply.
He also said that the Hong Kong retail market has slowed down, but the company's retail portfolio will continue to benefit from low unemployment rates in Hong Kong and increasing visitors from the mainland, as the retail rent for Pacific Place has increased by 5 percent in the past 12 months.
Along with the maturing of Swire's projects on the mainland, its mainland rental income will be increasing too, Cubbon added.
Swire Pacific's marine service divisions will see a stronger second half too, as the daily rate of its vessels has increased during the past few weeks, said Pratt.
But Pratt is not so optimistic about its beverages division, whose attributable profit decreased 40 percent in the first half.
"If China's economic growth continues to slow down, it will be hard (for the beverages business)," Pratt said, adding that during the past decade, its beverages business recorded a double digit percentage growth every year, but now the company expects the business to be flat in 2012.
sophiehe@chinadailyhk.com
(HK Edition 08/11/2012 page2)