Li Ka-shing

Li Ka-shing labels current downturn in Hong Kong property, retail sales worse than during Sars epidemic

CK Hutchison reports 2015 profit of HK$31.2 billion

PUBLISHED : Thursday, 17 March, 2016, 5:35pm
UPDATED : Friday, 18 March, 2016, 8:41am

Hong Kong is experiencing some of its harshest economic conditions in two decades amid global weakness, with the current downturn in property and retail sales “worse” than during the Sars epidemic, said CK Hutchison’s chairman Li Ka-shing during a press briefing Thursday on the conglomerate’s global performance.

Despite the challenges, the revamped conglomerate that houses the tycoon’s non-property assets, posted a better than expected net profit for last year, and Li said he hoped it can raise its dividend this year.

“The global economy in 2015 experienced mounting deflationary pressures resulting in a collapse in commodity prices and slow global trade,” Li said in a filing to the Hong Kong’s stock exchange.

“In addition, volatility in global equity, debt, commodity and currency markets may increase against a background of continued monetary easing in Europe, increased global political uncertainty, economic and refugee issues in Europe, as well as increased geopolitical risk in the Middle East and African regions.

“I am confident that Britain will stay in the EU. If it leaves the EU, we will be more cautious and reduce our [future] investment in Britain,” he told reporters.

In Hong Kong, he said the economy is experiencing some of its toughest moments in two decades, with “property sales and retail sales [at times] worse than during the Sars epidemic [in 2003].”

CK Hutchison, whose businesses range from ports and retail to energy and telecommunications, Thursday posted an adjusted net profit of HK$31.2 billion in its first full-year earnings report after a group reorganisation last year.

The result was slightly ahead of the consensus HK$31 billion estimate in a Thomson Reuters poll of 14 analysts.

Turnover was HK$316.31 billion, the company said on Thursday in a filing to the Hong Kong’s stock exchange.

The board proposed a final dividend of HK$1.85 a share, bringing the full-year payout to HK$2.55.

READ MORE: Li Ka-shing’s CK Hutchison and CK Property top annual profit estimates

The company sourced only 6 per cent of its earnings before interest, taxes, depreciation and amortisation (ebitda) from Hong Kong, compared to 34 per cent from Britain, 19 per cent from continental Europe, 13 per cent from mainland China, 8 per cent from Canada and 18 per cent from Australia, and other parts of the world.

Some 35 per cent of the ebitda came from its investments in infrastructure, followed by 24 per cent from telecommunications, 16 per cent from retail, 13 per cent from port and related services, 10 per cent from energy and 2 per cent from finance, investments and others.

To enable meaningful year-on-year comparison, it gave a set of “pro-forma” results assuming the group’s restructuring and spin-off of property assets into separately-listed Cheung Kong Property took effect on January 1 last year, even though it was completed on June 3.

The ebitda of comparable operations fell 7 per cent to HK$82 billion from 2014, due mainly to lower earnings from its energy business and unfavourable foreign currency translation effects, especially European currencies. But the ebitda grew 2 per cent when taking into account the home currencies where the businesses are located.

After adding non-comparable operations, total ebitda grew 5 per cent to HK$92.1 billion from 2014.

Its Canadian oil and gas unit Husky Energy posted a 92 per cent drop in net profit to C$165 million before including asset write-downs.

Ebitda at its European mobile communications operations grew 12 per cent to HK$17.4 billion from 2014, while that of retail fell 5 per cent to HK$14.84 billion.

When accounted for in currencies of places where the businesses are located, the telecoms business’ ebitda grew 27 per cent while that of retail grew 4 per cent.

Shares of CK Hutchison dropped 0.25 per cent to close at HK$98.85 on Thursday ahead of the results.