August 4, 2011 / 9:03 AM / 6 years ago

UPDATE 3-Hutchison H1 undershoots due to 3G, port charge

* H1 profit soars but lags f‘cast, spinoff gains at HK$44.3 bln

* Analysts say 3G not recovering fast enough

* To pay higher interim dividend of HK$0.55 per share

* Li says Hutchison positioned for growth, but global economy a concern (Adds quotes)

By Donny Kwok and Joy Leung

HONG KONG, Aug 4 (Reuters) - Li Ka-shing’s ports-to-telecoms conglomerate Hutchison Whampoa fell short of forecasts for first half profits on Thursday, dragged back by its 3G business and a bigger-than-expected charge on a major asset sale.

The company reported a more than sevenfold rise in net profit, helped by a hefty one-off gain from the spin-off of its port assets, and the Hong Kong billionaire was upbeat about its prospects.

But analysts said the 3G business was not recovering as fast as expected and cited a larger-than-expected impairment charges of HK$7.11 billion on some of its ports assets.

“It was a little disappointing. The market had been too optimistic about its earnings,” said Alex Wong, a director at Ample Finance Group.

Hutchison, whose businesses include telecommunications operator 3 Group and Watsons retail stores, reported net profit of HK$46.3 billion ($5.95 billion), including a one-off gain of HK$44.3 billion for the first half.

That compared with net profit of HK$6.32 billion for the first half of 2010 but lagged an average forecast of HK$51.2 billion from 10 analysts surveyed by Thomson Reuters.

Hutchison said it booked a one-off gain of HK$44.29 billion in the first half from the Singapore initial public offering of its southern China ports assets -- Hutchison Port Holdings Trust .

Its 3G arm posted an EBIT (earnings before interest and tax) of HK$767 million during the first half against an LBIT (loss before interest and tax) of HK$2 billion a year ago. Some analysts have expected 3G EBIT to reach as high as HK$1.3 billion in the first half.

Hutchison said its 3G customer base totals over 30.2 million worldwide, up only 3 percent in the first half.

POSITIONED FOR GROWTH?

Stronger performances of its energy, retail, property and infrastructure combined to increase its first half earnings, analysts said.

(For details of Hutchison's interim results, click here)

“With core businesses performing well and generating cash, a stronger balance sheet and liquidity, the group is well positioned for continued growth and will continue to invest and expand its core businesses,” Chairman Li Ka-shing said.

“The group’s diversified portfolio of businesses worldwide will continue to perform favourably. I remain confident in the group’s outlook and development in the second half of 2011,” he said in a statement.

But some analysts are unconvinced, citing uncertainties about the global economic outlook.

“Looking forward, I don’t see much catalyst that can boost Hutchison stock right away. But we are happy with the dividend,” said Linus Yip, chief strategist at First Shanghai Securities.

Hutchison, an associate of Li’s property arm Cheung Kong (Holdings) Ltd , declared an interim dividend of HK$0.55 per share, up from an interim dividend of HK$0.51 per share that it has been distributing since 2000.

Hutchison’s third-generation (3G) telecommunications business, which had been losing money over the past decade but broke even in the second half of 2010, recovered further this year. Hutchison said it was expected to contribute to the conglomerate’s profits in the second half of 2011.

Hutchison’s telecoms business 3 Group includes 3G network operations in Britain, Italy and Australia, among other countries.

It competes with Britain’s biggest mobile operator, Everything Everywhere -- a joint venture of France Telecom SA’s Orange and Deutsche Telekom AG’s (DTEGn.DE) T-Mobile. It also competes with Telefonica SA’s O2 and Vodafone Group Plc .

HUSKY AND CKI BOOST EARNINGS

Hutchison’s earnings were boosted by sharply higher contribution from its infrastructure investment arm Cheung Kong Infrastructure Holdings (CKI) and oil and gas unit Husky Energy Inc .

Husky last week reported a higher-than-expected second-quarter profit. It earned C$669 million ($709.0 million) in the second quarter compared with C$179 million a year earlier.

Last week, CKI posted a 96 percent rise in its first half net profit, beating expectations, after stellar gains in its newly acquired UK operations.

On Tuesday, a consortium comprised of CKI, Cheung Kong (Holdings) and another unit controlled by Li Ka-shing agreed to buy British utility Northumbrian Water Group for 2.4 billion pounds ($3.9 billion) in the biggest takeover this year of a British-listed company, as Li continued to expand his business empire by buying utility assets in developed countries.

Hutchison’s retail, and property and hotels divisions each saw their EBIT grow 25 percent on year in the first half, while its ports division registered an expected 20 percent drop in EBIT as a result of the spin-off of Hutchison Port Holdings.

Hutchison shares ended 0.9 percent lower on Thursday ahead of the results as Hong Kong’s benchmark stock index lost 0.5 percent. Cheung Kong eased 0.08 percent.

Cheung Kong (Holdings), which holds a controlling stake in Hutchison, posted a 169 percent rise in first-half profit to HK$33.26 billion, beating an average forecast of HK$31.2 billion. (Additional reporting by Chyenyee Lee; Editing by Charlie Zhu and Andrew Calus)

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