Jardine sees cost pressures after bumper results

PUBLISHED : Saturday, 08 March, 2008, 12:00am
UPDATED : Saturday, 08 March, 2008, 12:00am

Jardine Matheson Holdings, the 175-year-old hong whose investments range from Hong Kong property to Indonesian car manufacturing, said that despite bumper results last year, rising costs in Asia and a slowdown in the United States were creating an uncertain business environment.

'At the moment, most of the sectors in which we operate are still seeing good demand but we are perfectly conscious that things can change,' managing director Anthony Nightingale said yesterday.

'Cost pressures throughout East Asia are clearly growing ... We'll have to see as the year develops what sort of impact the slowdown in the United States and some other parts of the world has on demand in this region.'

Mr Nightingale said last year's record results left the Asian-based, Singapore and London-traded conglomerate in a healthy position to fend off a potential downturn.

Underlying profit expanded 32 per cent to US$399 million in the six months to December, up from US$302 million a year earlier, on strong contributions from Central landlord Hongkong Land, Asian retailer Dairy Farm and Indonesia's car to palm oil conglomerate Astra International. The three units accounted for 65 per cent of core profit for the group last year.

Rising costs and a downturn in demand would spell an end to a trend of expanding profit margins and accelerating sales growth at the firm. Jardine's second-half margin on core profit rose to 3.9 per cent, up from 3.5 per cent in the first half and 3.3 per cent in 2006.

Turnover growth accelerated in the second half, with sales climbing 22 per cent to US$10.26 billion in the six months to December compared with a 19.4 per cent increase to US$19.45 billion for the full year.

Underlying earnings per share rose 34 per cent to US$2.03 last year, up from US$1.51 a year earlier and 13 per cent above the US$1.79 forecast in a Bloomberg survey of analysts.

Consolidated net debt excluding financial services companies fell 55 per cent to US$618 million, while the firm's gearing ratio dropped to 5 per cent from 12 per cent on property valuation increases.

The gearing ratio rises to about 15 per cent when 47 per cent-owned developer Hongkong Land is factored in, according to group finance director James Riley.

Healthy position

In the six months to December, underlying profit increased: 32%