Swire Pacific’s net profit plunges 65% to $8.44b in 1H12

Blame it on the worse-than-expected first half results that hit its affiliate, Cathay Pacific Airways Ltd.

The company blamed the 65% drop to the high fuel costs, fewer premium passengers and weak cargo demand that hit its affiliate, Cathay Pacific Airways Ltd. Underlying group profit also plunged, falling 51% to HK$2.26 billion from HK$4.6 billion. Revenue rose 14% to HK$19.39 billion from HK$17.08 billion.

Cathay Pacific took a net loss of HK$935 million in the first half compared to the HK$2.81 billion profit year-on-year, which was the airline’s worst first-half loss since 2003.

Swire Pacific Chairman Christopher Pratt said one of the reasons for the disappointing figures is that Cathay Pacific's worse-than-expected first half results was affected by seasonal factors. He noted, however, that conditions will improve with expected increased business travel in October and November.

"We are anticipating a stronger second half, (and) there are various reasons for that (anticipation)," he said.

Swire Properties, the group’s landholding unit, said its net profit dropped 50.7% due to real estate revaluation despite a rise in underlying profit to 3.8% in the first half on rental income growth from its office and shopping malls in Hong Kong and the mainland.

Swire Properties CEO Martin Cubbon said demand for office space in Central has weakened, and the market rate has dropped 10% to 15% in the past 12 months. He also said that the Hong Kong retail market has slowed down.

Despite this, Cubbon said that the occupancy for his company’s office portfolio in Hong Kong is as high as 98%. He believes the company's retail portfolio will continue to benefit from low unemployment rates and more visitors from the mainland, as the retail rent for Pacific Place has risen by 5% in the past 12 months.

Income from Sanlitun Village, the group’s Beijing retail and entertainment development, grew and the company expects encouraging retail sales there in the second half, Pratt noted.