Wharf sees 2022 profits tumble 92 per cent as pandemic batters Hong Kong, mainland China property revenues

The developer saw every segment of its operations slow down amid what the company called ‘weak markets’ and ‘pandemic woes’
Wave after wave of lockdowns in mainland China, and tough quarantine requirements for inbound travellers in Hong Kong meant the company’s hotels struggled too

Hong Kong property

Elise Makin Beijing

Published: 6:30pm, 9 Mar 2023

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Hong Kong-listed Wharf (Holdings) delivered a lacklustre performance in 2022, suffering heavy losses across the board as the pandemic, and in particular China’s strict zero-Covid measures, hurt the property market.

The developer saw every segment of its operations in Hong Kong and mainland China slow down, according to its annual report released on Thursday. Net profit for the year fell 92 per cent to HK$303 million (US$38.6 million) amid what the company called “weak markets” and “pandemic woes”.

Wharf’s property sales plummeted 74 per cent to HK$6 billion, while rental income dropped 11 per cent.

Its business has been hit hard by Covid-19 before, but this is the first time the pandemic has led to losses in all segments and a drop in net profit.

In 2020, the first year of the pandemic, the developer still managed to add 14 per cent in net profit to HK$3.09 billion. The following year, its profit increased 7 per cent to HK$3.64 billion despite “waves of Covid-19” hampering recovery.

Last year, the company said, the pandemic wiped HK$10 billion off its assets, reducing their value to HK$152 billion.

Founded in 1886 to run wharfage and dockside warehousing, Wharf’s operations now span property, hotels, transport and warehousing. It owns the iconic Star Ferry, two major flagship properties in the Harbour City and Times Square shopping centres in Hong Kong among other assets.

In Hong Kong, full-year property sales came to HK$1.025 billion, and Wharf had HK$733 million on its order book at year-end. Revenue from development properties in 2022 dropped 79 per cent to HK$905 million, while operating profit sank by 59 per cent to HK$616 million.

In mainland China, the company’s contracted sales slumped 70 per cent to 4.2 billion yuan (US$600 million). Those receipts came mainly from projects in Hangzhou in Zhejiang province and Suzhou in Jiangsu province.

Sentiment among homebuyers and residential transactions had been significantly dented by market illiquidity and high-profile defaults reported by debt-ridden developers, Wharf said.

China’s strict zero-Covid policy, which reached a pinnacle in 2022 marked by an unprecedented three-month lockdown in the financial hub of Shanghai, wrought havoc on businesses and slowed economic growth. Beijing made a U-turn in late December, hoping to spur economic growth and restore market confidence.

“National retail sales were stagnant in 2022 due to stringent lockdown measures that crippled the local economy and slowed consumer spending,” Wharf said of its investment properties in mainland China.

“Sentiment towards discretionary spending was especially weak in December when infection spread after the lifting of lockdown measures. Office leasing demand was also hindered by the moderating economy and volatile business environment, leading to soft rental and occupancy in an already oversupplied market.”

Wharf saw its first ever loss in revenue from its investment property portfolio as a result, it said, citing a more severe impact in the second half of the year. Turnover dropped 11 per cent to HK$4.798 billion and operating profit fell 9 per cent to HK$3.226 billion.

Wave after wave of lockdowns in mainland China, and tough quarantine requirements for inbound travellers in Hong Kong meant the company’s hotels struggled. The segment suffered a 26 per cent slump in revenue to HK$369 million and an operating loss of HK$27 million.

Its logistics infrastructure saw a moderate 1 per cent drop in revenue to HK$2.964 billion for 2022 as “Covid-19 and stringent precautionary measures in mainland China seriously disrupted the supply chain,” the company said.

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