August 5, 2010 / 11:35 AM / in 7 years

UPDATE 2-Ports, retail lift Hutchison to forecast-beating H1

* H1 profit HK$6.45 bln vs street view HK$4.4 bln

* Strong growth in retail, ports; 3G losses narrow

* Cheung Kong H1 net profit HK$11.9 bln, up 4 percent

* Hutchison shares down 0.7 percent in 2010 (Adds chairman’s comment)

HONG KONG, Aug 5 (Reuters) - Hutchison Whampoa 0013.HK is set for a strong second-half due to a rebounding global economy, after a strong performance in its ports and retail divisions helped billionaire Li Ka-shing’s flagship conglomerate post a forecast-busting first-half profit.

Hutchison, whose businesses include telecoms operator 3 and Watsons retail stores, said it will focus on its core business units, but also has a cash pile to help fund opportune acquisitions which will mostly be confined to low-risk investments for now.

”I am very optimistic about the second half. We see good growth even without acquisitions,“ Li told a media briefing.”

“Husky will continue to expand and our ports continue to build and we are buildling container ports in the U.K., in China and other countries,” said Li, Hong Kong’s richest man whose rags-to-riches rise in many ways reflects the rise of his adopted home and China. Husky Energy (HSE.TO) is Hutchison’s oil unit.

“We will continue to invest in China, Hong Kong and overseas.”

Last week, Husky posted a 23 percent drop in quarterly profit, missing analysts’ estimates. It lowered its output forecast because of falling production at its White Rose field. [ID:nSGE66R0IK]

Victor Li, son of Li Ka-shing and Hutchison’s deputy chairman, said the company is eyeing a return on investment of 11-12 percent.

With HK$106 billion cash in hand, the firm is looking at relatively low-risk acquisitions in politically and economically stable countries.

LOWER 3G LOSSES AID EARNINGS

Hutchison posted a net profit of HK$6.45 billion ($827 million) for the first half of 2010, up 12 percent from the HK$5.76 billion recorded a year earlier. That handily beat a HK$4.4 billion average market forecast from a survey of four analysts by Thomson Reuters.

“Its a surprisingly strong earnings led by stronger than expected growth in retail and port businesses,” said Patrick Yiu, a director at CASH Asset Management. “Much lower than expected 3G losses helped drive the earnings.”

The company has benefitted in recent years by one-off gains that helped shield its bottomline from the worst of the global economic downturn.

It recorded HK$4.65 billion in disposal gains in the first half of 2009 from the merger of its Australia 3G business with Vodafone Group Plc’s (VOD.L).

But the relative absence of such gains this year was expected to hit its bottomline and result in an earnings drop.

“In the current economic environment, the group will continue to focus on operational and financial disciplines while investing where good opportunities to expand its core businesses arise,” Hutchison, one of Asia’s top conglomerates, said in a filing to the Hong Kong stock exchange.

Total revenue from ports and related services grew 14 percent to HK$17.7 billion during the period. Earnings before interest and taxes (EBIT) rose 35 percent to HK$6.07 billion. Its retail divison reported sales growth of 8 percent to HK$57.5 billion with EBIT up 54 percent to HK$2.85 billion.

The company’s loss-making third generation (3G) mobile phone service, which has long been a drag on earnings, was nearing a turnaround, with losses narrowing to HK$998 million for the first half from a HK$5.45 billion loss in the same period a year ago.

“Management expects the threegroups to make a positive contribution to the group’s full-year EBIT results,” Chairman Li said.

Hutchison’s controlling shareholder Cheung Kong Holdings Ltd (0001.HK) booked a 4 percent rise in first-half net profit to HK$11.9 billion, with increased contributions from property sales, rental and management businesses.

Hutchison and Cheung Kong shares are down 0.7 percent and 3.7 percent so far this year, respectively, compared with a 1.5 percent decline of the benchmark Hang Seng Index .HSI. (US$1=HK$7.77) (Reporting by Donny Kwok; Editing by Chris Lewis and Muralikumar Anantharaman)

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