Swire Pacific Ltd., the Hong Kong office landlord and owner of 40% of Cathay Pacific Airways Ltd., said 2008 profit fell 78% as the airline’s first loss in a decade erased gains in rental income.
Net income dropped to HK$5.9 billion ($761 million), or HK$3.90 a share, from HK$26.3 billion, or HK$17.26, a year earlier, the company said in a Hong Kong stock exchange filing. Sales rose to HK$24.7 billion from HK$21.55 billion.
Swire, which leases office space to Time Warner Inc. and Societe Generale, increased real-estate revenue after completing a new building last year.
The worst slump in Hong Kong’s property market since 2003 may not affect Swire’s earnings until 2010 as contracts are gradually renewed, analyst Danie Schutte said. Swire, created as a trading company in London in 1816, also bottles Coca-Cola in China and supplies offshore oil rigs.
‘The downside in rents would be much smaller than for landlords in Central, where tenants are typically front-end operations of investment banks that suffered the brunt” of job cuts, Schutte, a Hong Kong-based analyst at CLSA Asia-Pacific Markets, said before Swire’s earnings announcement.
Bloomberg reported the Hong Kong head offices of Citigroup Inc and HSBC Holdings Plc, banks that announced job cuts, are in Central. Admiralty and Quarry Bay offices have tenants such as the back offices of banks, information technology companies and law and accounting firms, he said.
Profit excluding property revaluations fell 49% to HK$5.29 billion from HK$10.3 billion a year earlier, Swire said. That compares with the HK$3.85 billion median of 14 analyst estimates compiled by Bloomberg.
Swire gained 1.5% to HK$45.10 at the midday trading break in Hong Kong, before the earnings were announced. The stock has dropped 50% in the past 12 months, compared with a 49% drop in the benchmark Hang Seng Index.