In this July 30, 2017 file photo, the logo for CK Hutchison Holdings Ltd is displayed atop the Cheung Kong Center building, which houses the company's headquarters, in Hong Kong. (ANTHONY KWAN / BLOOMBERG)

HONG KONG - Business conditions in 2021 likely will be similar to those in the second half of 2020 because of the pandemic and the geopolitical environment, CK Hutchison Holdings warned on Thursday, as the company posted its first annual profit decline since 2015.

The port-to-telecom conglomerate — founded by Li Ka-shing, the city’s richest tycoon — made the prediction after reporting a 27 percent drop in net profit, to HK$29.14 billion (US$3.75 billion) in 2020. Earnings before interest, taxes, depreciation and amortization, or EBITDA, sank 10 percent to HK$122.35 billion. A final dividend of HK$1.7 per share was declared, down from HK$2.3 a year ago.

The outlook for the year remains unclear for other major economies with uncertainties surrounding the threat level posed by new virus variants, substantial geopolitical risks, as well as risks to trade stability, risks arising from Brexit, and macro-economic risks associated with the unprecedented levels of global debt.

 Victor Li, CKH Holdings chairman 

“The outlook for the year remains unclear for other major economies with uncertainties surrounding the threat level posed by new virus variants, substantial geopolitical risks, as well as risks to trade stability, risks arising from Brexit, and macro-economic risks associated with the unprecedented levels of global debt,” CKH Holdings Chairman Victor Li Tzar-kuoi cautioned in a company statement filed with the Hong Kong Stock Exchange on Thursday. 

Meanwhile, the net profit of the conglomerate’s real estate arm, CK Asset Holdings, plummeted nearly 44 percent to HK$16.33 billion, while its underlying profit dived 32.5 percent, to HK$19.34 billion. The full-year distribution per share was down 14.3 percent, to HK$1.8 per share.

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Both results were within market expectations. CK Hutchison closed at HK$62.9 per share on Thursday, up 1.37 percent. CK Asset’s stock price climbed 2.51 percent to close at HK$47.05.

Speaking at a news conference, the chairman stressed different businesses of the conglomerate have demonstrated resilience under the unprecedented crisis. He believes the businesses, especially in the hotel, pub and retail categories, will see a strong rebound after the pandemic is under control worldwide.

“In 2021, the group will continue to react nimbly to changing business conditions, which will likely be similar to the second half of 2020,” Li said, adding that the group will continue to search for new acquisition and investment opportunities.

“As for most enterprises globally, 2020 has been a year of unprecedented challenges,” he said. “The group has been affected by the pandemic and the significant reduction in oil and gas and refined products prices. However, following a solid recovery (on the Chinese mainland) from the second quarter and the stabilizing effects of very substantial fiscal and monetary support by governments and central banks around the world throughout the year, economic conditions in many of the countries in which we operate have generally improved in the second half.

The group plans to open about 1,000 new stores across the world, mostly in Asia, where strong performances were recorded

“Although some economic recovery in the second half benefited the group’s businesses which were hit hardest in the first half, particularly the retail and ports businesses, this was not sufficient to offset the very material declines in the earnings reported in the first half. In addition, the operating losses and asset impairments recognized by Husky Energy continued to negatively affect the group’s reported net earnings throughout the year.”

Telecom business outperformed other sectors, with an EBITDA of HK$48,540 million, up 37 percent. Li said that the group will continue its expansion in 5G services in Asia and Europe.

In 2020, its retail division, AS Watson, recorded e-commerce sales growth of 90 percent, driven by the continuing digital transformation of its business. In the first two months of 2021, the retail business has returned to 2019 levels in terms of profitability, Li said.

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The group plans to open about 1,000 new stores across the world, mostly in Asia, where strong performances were recorded. The retail division will continue with its strategic direction in accelerating its “online plus offline” platform strategy to enhance recovery path, he said.

Also on Thursday, CK Asset announced it plans to acquire interests in an investment portfolio for HK$17 billion. The portfolio comprises four projects in the Europe related to electricity, water, gas distribution and energy-from-waste.

The proposed acquisition will be paid for by the issue of over 333.33 million consideration shares at HK$51 per share, which is higher than the 52-week high price. Meanwhile, the company will buy back all shares from the public, at the same price of HK$51 to cancel out the dilutive effect.

The company will ensure the total dividends per share in 2021 and 2022 will be higher than that of 2020, the company said at the news conference.