Swire Pacific sees stronger headwinds as Hong Kong grapples with increasingly disruptive protests

Swire Pacific, one of Asia’s largest conglomerates, said that the protests in Hong Kong have affected many of its businesses, but is in a financially strong position to weather any challenges that could come its way.

Swire Pacific, whose businesses span aviation, real estate and offshore marine services, on Thursday reported a near twelvefold increase in first-half underlying profit to HK$15.85 billion (US$2.02 billion) from HK$1.27 billion last year, boosted by the sale of Cityplaza Three and Cityplaza Four.

Excluding asset sales, underlying profit grew by 40 per cent to HK$4.23 billion, helped by the positive performance of most of its units, including the turnaround of Cathay Pacific Airways.

“Notwithstanding the improved performance in the first half, we are facing stronger headwinds,” said chairman Merlin Swire. “Global trade tensions and protests in Hong Kong are having direct and indirect effects on demand in a number of our businesses.”

Cathay Pacific said Hong Kong’s nine-week protests are dampening ticket sales for the coming months both for inbound and outbound travel.

Swire Pacific is also the parent firm of Swire Properties, which operates shopping centres including Pacific Place in Admiralty, that has been affected by the protests.

Swire Properties’ underlying profit in the first six months of 2019 tripled to HK$18.6 billion from HK$6.2 billion a year earlier.

Some of the shops in the upscale mall in Admiralty were shut early on June 12 as protesters gathered in the area to demonstrate against the now suspended extradition bill. The demonstrations have been going on for two months now, with protesters bringing the city to a standstill on Monday in a citywide strike that saw hundreds of flights cancelled, MTR operations disrupted and roads blocked.

Swire Properties, through Swire Hotels, also owns The Upper House at Pacific Place and EAST, Hong Kong at Taikoo Shing. It also has a 20 per cent interest each in JW Marriott, Conrad Hong Kong and Island Shangri-La hotels at Pacific Place and in the Novotel Citygate in Tung Chung.

“Pacific Place’s July numbers on the retail side were a little bit soft and there were a few days where there were demonstrations in the Pacific Place vicinity and some early stores closure as a result of that and [we also] closed down the anchor store in Pacific Place, which is Harvey Nichols for a major renovation so at this stage we don’t know how much is due to the closure of the anchor store, and how much is due to the disruptions,” said Guy Bradley, chief executive at Swire Properties.

He also said that hotels in Admiralty reported lower occupancy rates compared to a year ago and “some of that were due to disruptions in June and July”.

As for office leasing, Bradley said the decentralisation trend in Hong Kong would benefit the developer’s One Taikoo Place, which opened last September in the Eastern district. Swire Properties also owns Pacific Place, Taikoo Place and Cityplaza One.

“We’re full at the moment. Our Pacific Place office building is pretty much fully let and these are five- to eight-year deals,” he said.

Michelle Low, Swire Pacific’s finance director, said the group was still assessing the full impact of the protests on their businesses.

Swire Pacific declared dividends of HK$1.35 per A share and HK$0.27 per B share, a 13 per cent increase compared to the first half of 2018.