Hutchison Port Holdings volume, earnings fall in first quarter

Hutchison Port Holdings volume, earnings fall in first quarter

Port of Hong Kong

Singapore-listed Hutchison Port Holdings Trust reported year-over-year drops in revenue, operating profit and net income of 7 percent, 10 percent and 26 percent for the first quarter of 2016.

The company, which owns and operates deep-sea container terminals in Hong Kong and mainland China, booked a net profit of 210.1 million Hong Kong dollars ($27.1 million) on the back of 2.75 billion Hong Kong dollars in revenue from January to March. Operating profit was 742.2 million Hong Kong dollars.

Throughput declined 8 percent compared with the same period last year, with volumes at South China’s Yantian International Container Terminals down 1 percent and combined volumes at the Hong Kong operations — Hongkong International Terminals, Cosco-HIT and Asia Container Terminals — down 13 percent year-over-year.

Management said the throughput drop at YICT was mainly due to weaker transshipment and empty cargoes, which were partially offset by growth in U.S. and Europe cargoes. The rationalization and restructuring of various global shipping alliances negatively impacted business at Hong Kong, HPH said.

“Given the shortfall was principally a function of transshipment and empties, we would have expected the revenue to decline by a smaller degree. However, with the year-over-year weakness in the Chinese yuan, the tariff initiatives last year and relative stabilization in export trends to Europe/U.S. provided less of a benefit than expected,” the financial institution Citi said of HPH’s performance.

Given the soft global trade outlook, HPH management expressed caution on expected volumes for the remainder of 2016. The company said it would continue to focus on improvements in tariffs and costs, and that the performance of the company was also partly dependent on the outcomes of structural changes occurring in the container shipping industry.

The stable U.S. economy should result in a slight increase in outbound cargoes to the U.S. over the full year, but volumes to Europe would likely be flat, the company said in its results announcement.

“Outbound cargoes to Europe showed improvement and displayed a slight upward trend in the first quarter of 2016. However, weak consumer sentiment and high unemployment rates remain a drag on its economic recovery. We expect volume towards Europe will likely be flat in 2016.”

Throughput at YICT is largely dependent on the economic performance of the U.S. and Europe.

HPH said it would target improving its core debt metrics over the five-year period from 2017 to 2022 in order to ensure continued access to financial markets and maintain its investment grade rating. The firm currently carries a floating debt of 33 billion Hong Kong dollars.

Contact Turloch Mooney at turloch.mooney@ihs.com and follow him on Twitter: @TurlochMooney.

A version of this story originally appeared on IHS Fairplay, a sister product of JOC.com within IHS.