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SCMP Reporter

SWIRE Pacific has posted an impressive 40.8 per cent rise in interim profits to $2.89 billion for the first six months of this year.

It was bolstered by higher than expected profit contributions booked from sales of luxury flats at Robinson Place in Mid-Levels.

Stronger contributions were also reported from rental income on the group's substantial property investment portfolio, Cathay Pacific Airways, Hong Kong Dragon Airlines and Volvo car sales in Taiwan.

The poor performers in the group included the industries division, with poor weather and retail market conditions blamed for dragging down Swire Beverages' soft drinks sales.

Hong Kong Aircraft Engineering Co (HAECO), London-based insurance broker Swire Fraser and the group's marine services division, all produced lacklustre results.

While analysts hailed the hong's first-half performance, doubts were being cast last night over how long this kind of momentum could be maintained in the short to medium term.

Of 294 flats in One Robinson Place on Robinson Road, 198 were handed over to buyers during the half-year, enabling Swire to book profits. These were mainly units pre-sold at the peak of the property market last year when Swire was fetching about $9,700 a square foot. This also accounted for virtually the entire $1.02 billion booked on sale of property under development in the first half.

A further 25 units in Robinson Place have recently been sold, leaving just 71 units to be sold in the rest of the year.

With the slump in the property market, Swire is believed to have been fetching about $7,500 per square foot for Robinson Place units recently sold.

Once these are gone, Swire has nothing in the way of one-off profits from property sales to prop up its balance sheet until probably late next year when sales of flats at its China Motor Bus Co depot redevelopment in North Point, called Island Place, get under way.

Even then, the contributions are likely to be modest compared with the windfalls enjoyed from Robinson Place in the past few years.

Completion of the office tower at Island Place has been deferred to 1997, when a string of other Swire property developments should be reaching completion.

These concerns, coupled with a spate of profit-taking, sent Swire Pacific A shares sliding $1.75 yesterday to close at $58.50 after the lunch-time announcement.

In the light of the exceptional first-half showing, Swire has once again rewarded its shareholders with increased dividends.

Dividends of 39 cents per A share and 7.8 cents per B share were declared, representing an 18.2 per cent rise over those paid for the same period last year.

Swire chairman Peter Sutch paid tribute to Cathay, which announced on Wednesday a 22.4 per cent increase in interim profits to $983 million after several laggard years. Swire owns 50.2 per cent of Cathay.

'Cathay Pacific has seen a welcome improvement in its results, reflecting the benefits of the airline's cost containment programme and increased load factors, although yields have remained weak,' he said.

 HAECO reported on Tuesday a 19 per cent drop in first-half attributable profits to $174.2 million.

Mr Sutch said this indicated continuing pressure on the company's operating margins resulting from the depressed world market for aircraft maintenance and the impact of high Hong Kong inflation.

Other firms in Swire's diverse aviation division reported satisfactory results.

Dragonair enjoyed significant increases in capacity, yields and productivity.



Swire net rises 40.8pc