ROUNDUP Hong Kong's Hutchison 2006 net profit up 40 pct as 3G losses narrow

ROUNDUP Hong Kong's Hutchison 2006 net profit up 40 pct as 3G losses narrow

	Published : Thu, 22 Mar 2007 12:42 By : Agencies Print this Story

HONG KONG (XFN-ASIA) - Hutchison Whampoa Ltd announced a 40 pct rise in 2006 net profit to 20.03 bln hkd, supported by growth in its core businesses, narrowing of 3G losses and one-off gain from sale of a stake in its ports division.

The earnings were at the top end of the range of forecasts of analysts surveyed by XFN-Asia.

'Both the group's established businesses and the 3 Group recorded growth and improved results in 2006,' chairman Li Ka-shing said.

Total revenue for 2006 stood at 267.66 bln hkd against 241.86 bln a year earlier, while earnings per share rose to 4.70 hkd from 3.36.

Earnings before interest and tax (EBIT) stood at 50.89 bln hkd, up from 32.60 bln a year earlier.

Hutchison's third generation (3G) mobile operations recorded a loss of 20 bln hkd before interest and taxes in 2006, narrower than the 36.28 bln loss posted a year earlier due to 'continued growth in its customer base and revenue,' Li said.

The 3 Group recorded total revenue of 50.7 bln hkd, up 35 pct from a year earlier.

3G customer base increased 30 pct last year and currently stands at over 14.7 mln. The average revenue per active user last year was 45.63 eur, up 8 pct from a year earlier.

Li reiterated that the company targets to achieve positive monthly EBITDA for its 3G business after customer acquisition costs on a sustainable basis during the first half of this year and positive monthly EBIT on a sustainable basis next year.

An Analyst said he expects Hutchison to achieve these targets in light of improvements in the 3G business last year.

'Given that Hutchison was able to reduce losses to 20 bln hkd as the market had predicted, there is little concern now whether the conglomerate could narrow this further this year and achieve EBIT in 2008,' said Wong Chi Man, a telecom analyst with China Everbright Securities.

'The result overall was largely in line with what the market expected. 3G losses narrowed, operating results of core businesses grew,' he said, adding that while the result did not contain positive surprises it did not entirely disappoint either.

Hutchison's chairman Li did not hide his satisfaction over the results.

'I am confident in our 3G business and the growth of Hutchison this year.. I am also very satisfied with Hutchison's performance in the past,' he told reporters following the results announcement.

The company is on track to narrowing 3G losses further this year, he said, without elaborating.

Hutchsion has no plans to sell its 3UK unit 'for now', he said, while declining to give a timetable for a spin-off of European 3G units including 3 Italia.

Hutchison's managing director Canning Fok said that 3 UK has achieved positive EBITDA in the first two months of this year.

The average revenue per user (ARPU) of the UK and Ireland combined operations stood at 46.57 stg, up 35 pct from year earlier. The ARPU of the Italian unit stood at 33.99 eur against 34.87 a year earlier.

Li, meanwhile, quashed speculation that the company may sell more assets in the near term, saying that none of Hutchison's retail or port assets will be sold this year.

He also ruled out buying out unit Hutchison Telecommunications International Ltd (HTIL).

China Everbright's Wong said the strong results unveiled today indicates that Hutchison Whampoa is 'under no pressure to sell.'

He said that following the recent sale of the conglomerate's Indian telecom business, Hutchison is currently in no hurry to undertake any more big assets sales.

'Its Indian telecom sale was a huge deal and it gives Hutchison reason to take things easy for now and not sell any of its assets, at least not sell to cover for any more 3G losses,' Wong said.

'Unless it gets very attractive valuation for its 3 businesses, Hutch is unlikely to sell. It might just wait for the better time do so and make bigger profits,' he added.

However, the analyst added that 'the truth is, as far as Hutchison is concerned, the sale and acquisition of big or small assets can't be ruled out as history of the company has shown this to be sort of norm.'

Hutchison Whampoa's unit HTIL recently announced a deal to sell its 67 pct stake in Indian telecom joint venture Hutchison Essar to the Vodafone Group for 11.1 bln usd.

In 2006, Hutchison booked disposal gains of 23.3 bln hkd, mainly from sale of a 20 stake in its ports division to Singapore's PSA International.

The conglomerate has sold a number of prime assets in the past which secured the company's earnings through the growth years of the 3G business after it was launched in 2003.

Some analysts have raised concern that the sale of these prime assets could be limiting the company's future growth.

China Everbright's Wong, however, believes that growth of established businesses including ports, retail, property and energy have not been comprised by the asset disposals.

'I don't think the sale is stressing out the core businesses. Growth of some 10-15 pct year-on-year for the ports and other businesses should still be okay,' he noted.

'Retail business posted growth in revenue of some 12 pct, but the division has potential to grow further with its expansion in the markets in Europe,' he said.

EBIT for Hutchison's core businesses grew 14 pct to 43.79 bln in 2006.

Hutchison's Li said any asset disposals will depend on valuations.

'We never sell our assets to cover the 3G losses. Disposal of any assets will depend on the valuation of the asset and whether or not the offer is attractive,' Li told reporters.

He noted that there is no point in selling unit Husky Energy as the Canadian oil company is doing well.

Li said he does not expect oil prices to see a sharp decline this year.

Commenting on the ports business, Li said the business is growing organically and that the company will keep expanding the operations.

Li also expects the company's debt to be reduced by a third this year.

He did not specify which debt will be reduced and how the company intends to go about it.

He said the company will continue to seek new opportunities in China as well as overseas.

'With our diversified portfolio of business worldwide, and our sound financial position, I am confident that our group's business will continue to perform well in 2007,' Li said.

The company declared a final dividend of 1.22 hkd a share, unchanged from the year earlier.

(1 usd = 7.8 hkd)

leonora.walet@xfn.com

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