HPHT’s earnings sink 27% to $36.4m in Q1

Due to weaker throughput, RMB depreciation.

Hutchison Port Holdings Trust (HPHT) saw a disappointing close to 1Q16, as core net profit after tax (NPAT) plunged 27% to HK$210.1m, or roughly $36.4m.

According to a report by OCBC, the drop is after stripping away an exceptional government refund of HK$430m, as well as the additional depreciation due to a change in accounting estimate last year.

Revenue for the quarter was also down, tumbling 7% YoY to HK$2.75b. This is due to decreased throughput in its HK ports as well as RMB depreciation. This was mitigated, though, by the tariff rate increments in both HIT and YICT.

OCBC notes costs of services fell more than proportionally, decreasing 10% YoY, helped by lower fuel prices and savings in operation costs.

Bracing for interest rate normalisation, HPHT is bidding to decrease its consolidated gross debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio to 4x, compared to the 5x guideline set previously.

This requires repayment of at least HK$1b of debt annually beginning in 2017, for five years—about HK$600m above the mandatory amortisation currently being paid yearly.

HPHT’s debt restructuring is seen to reduce total consolidated debt from HK$33b to HK$28b in 2021. This is expected to slash interest costs going forward. For FY16 DPU, management keft guidance unchanged at 30 to 32 HK cents.

Further, HPHT management expects outbound cargoes to the US to pick up slightly this year, while Europe export stays flat. Overall, throughput at HPHT’s HK ports is seen to recover in the second half of 2016, such that HPHT’s FY16 throughput remains flat over FY15.