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HPH Trust expects 2% Cargo Volume’s Drop From A Potential Trade War

Monday, 16 April 2018 | 00:00

Revenue and other income for the quarter was HK$2,667.3 million, HK$89.3 million or 3.5% above last year. Combined container throughput of HIT(a), COSCO-HIT(b) and ACT(c) (collectively “HPHT Kwai Tsing”) was 1.0% above last year, mainly due to the increase in transshipment cargoes. The container throughput of YICT(d) increased by 8.7% as compared to the same quarter in 2017, primary driven by the growth in empty and transshipment cargoes. Average revenue per TEU for Hong Kong and China were below last year, mainly attributed to certain revisions to tariffs following the M&A of some liners in 2 nd half of 2017. In addition, China's average revenue per TEU was also adversely impacted by unfavourable transshipment mix, but partially offset by RMB appreciation. Cost of services rendered was HK$992.2 million, HK$73.7 million or 8.0% above last year.

The increase were attributed to higher throughput handled, general cost inflations, including the increase in external contractors' costs and fuel price and RMB appreciation but partially offset by savings arising from cost saving initiatives. Staff costs were HK$77.1 million, HK$2.1 million or 2.8% above last year. Depreciation and amortisation was HK$776.3 million, HK$40.4 million or 5.5% above last year mainly due to West Port Phase II being put into full operation in January 2018. Other operating income was HK$66.9 million, HK$64.4 million or 2,576.0% above last year largely due to the dividends from River Ports Economic Benefits deferred from 2017 and exchange gain arising on revaluation of YICT's net-RMB denominated monetary assets. Other operating expenses were HK$125.7 million, HK$16.4 million or 11.5% below last year.

The decrease was mainly due to the receipt of government's rent and rates refund in HIT from lower 2017/2018 rateable value and savings in general overheads. As a result, the operating profit was HK$762.9 million, HK$53.9 million or 7.6% above last year. Interest and other finance costs were HK$229.0 million, HK$34.9 million or 18.0% above last year, largely attributed to higher HIBOR/LIBOR applied on the bank loans' interest rates.

Share of profits less losses after tax of associated companies was a loss of HK$33.9 million, worse than last year by HK$4.7 million or 16.1%, primarily due to higher depreciation and interest expenses of HICT as it became fully operational after its completion of construction in October 2017. Share of profits less losses after tax of joint ventures was HK$8.5 million, HK$8.5 million or 50.0% lower than last year, mainly due to weaker combined results of COSCO-HIT and ACT resulting from lower revenue per TEU, which was largely attributed to certain revisions to tariffs following the M&A of some liners in 2 nd half of 2017.

Tax was HK$87.2 million, HK$39.6 million or 31.2% lower than last year, mainly due to tax savings from YICT Phase III as it qualified as “High and New Technology Enterprise” in December 2017 and was entitled to a preferential corporate income tax rate for 3 years with effect from 1 January 2017. Moreover, YICT's West Port Phase II berth #5 and #6 were put into operation in January 2018 and started enjoying preferential corporate income tax treatment. Overall, profit was HK$421.3 million, HK$45.4 million or 12.1% above last year. Profit attributable to unitholders of HPH Trust was HK$145.4 million, HK$21.5 million or 12.9% below last year.

Commentary on the significant trends of the competitive conditions of the industry in which the Group operates and any known factors or events that may affect the Group in the next reporting quarter and the next 12 months

2018 is set to be a transformative year for the global shipping lines industry driven by shifting economic trends and trade flows in conjunction with the consolidation of ownership. Investment in modernization and expansion of port facilities is expected to continue to drive overall efficiencies and competitiveness. Overall 2018 global trade outlook remains positive, with solid trade volume growth recorded in the first quarter of 2018 although this, by and large, is still susceptible to the uncertainties and downside risks arising from protectionist US trade policies and geopolitical tensions.

Shipping lines will continue to deploy mega-vessels to attain capacity and fleet optimisation to drive further cost efficiencies. In addition, focus has shifted from port performance to supply chain performance to enhance competitiveness and operational efficiencies. Furthermore, greater emphasis will be placed on security in the wake of growing cyber-attack threats on companies. Against these settings, with a strategic transshipment hub in Hong Kong, the exemplary mega-vessel handling capabilities of YICT and our strategic investment in state-of-the-art equipment and facilities, HPH Trust is well positioned to support the changing requirement of the container shipping industry and maintain its reputation as the preferred gateways to the vast Pearl River hinterland.

The Trustee-Manager remains cautiously optimistic, subject always to the protectionism issue and geopolitical tensions referred above, about the expected cargo volume for 2018 and will continue to build on HPH Trust's strengths whilst adhering to strict financial discipline. The Trustee-Manager is confident that HPH Trust is well-equipped to respond to external developments and challenges.
Source: HPH Trust

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