Friday, July 10, 2020
Martin Hennecke

Cathay woes forecast to swat Swire Pacific
Swire Pacific (0019) issued a profit warning that consolidated recurring underlying profit for 2019 is expected to be below that of 2018, primarily due to the worse-than-expected performance of Cathay Pacific (0293). However, Swire Pacific said its consolidated underlying profit for 2019 is still expected to be substantially above that of 2018, benefiting from disposal of investment properties aggregating HK$11.94 billion recorded in the first half of 2019, and in the second half from a profit of HK$1.44 billion on the sale of an interest in an investment property. The group expected a HK$2.12 billion impairment charge to be made against the profits for the full year, as well as an estimated HK$440 million impairment charge on Haeco Americas' Cabin Solutions business and the Qinyuan bakery business. The profit warning was made after reviewing the prospects for its business since the interim report was published, Swire Pacific said. The group said the protests in Hong Kong have continued to reduce Cathay Pacific's passenger traffic and to affect forward bookings. It is no longer expected that Cathay Pacific will achieve better results in the second half of 2019 than in the first half. The group said that retail sales at its malls in Hong Kong have continued to be affected. Rental concessions have been offered to some of its retail tenants. Retail sales at the outlets of Swire Resources have continued to be adversely affected by the protests in Hong Kong and higher losses are expected at Qinyuan Bakery. Meanwhile, David Fu Yat-hung yesterday resigned as company secretary and St John Andrew Flaherty has been appointed company secretary, with effect from January 15 next year. The Cathay Pacific Group's attributable profit was HK$1.35 billion in the first half of 2019, compared with a loss of HK$263 million in the first half of 2018. It is in the final year of a three-year transformation program, which is designed to make its businesses leaner, more agile and able to compete more effectively. However, the airline's business was dragged down by the local social unrest. Its chief executive, Rupert Hogg, and chief customer and commercial officer, Paul Loo Kar-pui, resigned in August.

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