Hutchison's First Half Profits May Plunge 71%

Source: China Daily

Hutchison Whampoa, a telecoms-to-ports conglomerate controlled by business tycoon Li Ka-shing, is expected to post a 71 percent decline in first-half profits due to lower asset sales gains.

According to forecast by analysts responding to a Reuters poll, Hutchison's net profits in the first six months should fall to HK.47 billion. The conglomerate earned HK.8 billion in the corresponding period last year when it booked a HK billion gain from the sale of its Indian mobile phone network, Hutchison Essar (now renamed Vodafone Essar).

Cheung Kong (Holdings) and Hutchison, the twin flagships of Li Ka-shing's business empire, are due to announce their half-year results on Thursday.

Hutchison's 3G telecoms network is expected to reduce operating losses by half to HK.7 billion as subscriber churn declines and handsets get cheaper. AFP

According to analysts, earnings at sister firm Cheung Kong, Hong Kong's second-largest property developer by market value, should fall by a similar margine. Lower contributions from Hutchison and limited property development profits booked during the period should send Cheung Kong's net profits down about 67 percent to HK.1 billion.

However, more property completions expected in the second half should help Cheung Kong generate a full-year profit of HK.2 billion, an average forecast from 11 analysts showed.

Patrick Yiu, an associate director at CASH Asset Management, said the first-half profit fall is expected, and "Hutchison's 3G (third-generation) mobile telephone business will be the main concern."

Hutchison's 3G network is expected to trim operating losses by half to HK.7 billion as subscriber churn slows and handsets get cheaper, according to the Reuters' poll.

"Hutchison's share prices should be able to gain investors' support if the firm can lower LBIT (loss before interest and taxes) attributed to 3G," Yiu said.

The stock closed 2.83 percent lower at HK.05 yesterday, and Cheung Kong lost 4.32 percent to end at HK2.

Hutchison's underlying profits growth is expected to be strong thanks to improved 3G business as well as a strong performance at Husky Energy.

Record oil prices should help Canadian affiliate Husky Energy's contribution to Hutchison's bottomline jump by 85 percent in the first six months of 2008. The company's sale of 50 percent of the Sunrise oil sands to a joint venture with BP Plc should generate another HK billion in profits.

Contributions from Hutchison's world-leading container ports unit could rise between 7 percent and 10 percent as the group continues to diversify its earnings base.

Although retail sales in Europe are stagnating, Hutchison's sprawling retail operations are likely to see a 49 percent jump in profits as margins expanded after management enforced cost cuts.

Operating profits from its property business should rise 135 percent, boosted by rent increases, mainland property sales and a HK billion gain from the sale of an office building in Shanghai by unit Hutchison Harbour Ring.

Reuters contributed to the story. 

 (By Kwong Man-ki)

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