The financial results of Singapore-listed Hutchison Port Holdings Trust reveal a sharp drop in containers handled at its terminals in Hong Kong. Combined throughput of HIT, COSCO-HIT and ACT fell 12% year-on-year to 5.33m teu for the period ended June 30.
By comparison Yantian International Container Terminal, HPH Trust’s facility in Shenzhen saw throughput drop 1% to 4.66m teu during the same period.
HPH Trust’s interim revenue fell 6% to HK$5.7bn, down from HK$6.08bn during the first six months of 2015. Net profit after tax was HK$1.42bn, a 15% improvement on the same period in 2015, when the trust earned a net profit of HK$1.24bn. However, without HIT’s rent and rates refund in 2016 and additional depreciation due to the change of an accounting estimate in 2015, net profit after tax was 11% below last year.
Commenting on the results for the period ended June 30, the Trust said: “Despite a weak market outlook, overall 2016 first half results of HPH Trust have improved from its first quarter.
Trade outlook demands caution
“Management remains cautious on the volume outlook for the remainder of the year given the soft global trade outlook and the expected negative consequences of Britain’s exit from the European Union and will continue to focus on improvements to tariffs and costs.”
During the period under review, the Trust said outbound cargoes to the US and European Union showed an upward trend in the first half of 2016 but US trade slowed down in the second quarter. YICT’s throughput recorded a drop in the first half of 2016 as it was adversely impacted by the decrease in transshipment cargoes. The drop in HIT’s throughput was mainly due to weaker intra-Asia and transshipment cargoes.
On future prospects the Trust pointed to a number of negatives that could knobble growth in the short term. These included the British vote to leave the European Union, which posted downside risk to the global economic recovery.
“It is expected that Britain’s economy will be negatively impacted, with knock-on effects in the US and European economies. The depreciation of the British pound is expected to reduce Britain’s imports from Asia, including China, which have been increasing in the second quarter of 2016,” the Trust said.
“Despite relatively strong growth in the first quarter of 2016, outbound cargoes to US were weak in the second quarter. The sustainability of US economic growth in the remainder of the year will be the key determinant of a pickup in the US trade
As the gateway serving imports and exports of China, YICT’s volume is largely dependent on the economic performance of the US and Europe,” the Trust continued.
Taking advantage of structural changes in shipping
HPH Trust’s future performance is also dependent on the outcomes of structural changes occurring in the container shipping industry. HIT, as a regional transshipment hub, has been negatively affected by the service rationalisation of various global shipping alliances over the past few quarters and is expected to be under volume pressure in the near term.
Shipping lines continue to deploy mega-vessels to promote economies of scale, reform their carrier alliances – such as Ocean Alliance (China COSCO, CMA CGM, Evergreen and OOCL) and THE Alliance (Hanjin, Hapag-Lloyd, Kline, MOL, NYK, and Yang Ming), to improve efficiency, control costs and expand the coverage of vessel-sharing schemes to strengthen competitiveness.
HPH Trust’s natural deep-water channels and unparalleled mega-vessel handling capabilities position it to be the preferred port of call for mega-vessels and HPH Trust is expected to benefit from these developments.
“Given the soft global trade outlook, management remains cautious on the expected cargo volume for 2016 and will continue to focus on improvements to tariffs and costs,” the Trust concluded.