Wharf Holdings H1 Profit Down 95% as Lockdowns Put Clamps on Activity

Wharf Holdings on Wednesday said its profit attributable to shareholders plunged 95 percent year-on-year to HK$57 million ($7.3 million) in the first half of 2022 as COVID-19 lockdowns in mainland China and Hong Kong caused “severe hardships” to the group’s businesses.

The blue-chip builder controlled by Peter Woo’s Wheelock and Company reported a first-half underlying profit of HK$428 million, reversing a year-earlier loss of HK$360 million, but the figure marked a significant slowdown from the HK$3.65 billion posted for the whole of 2021.

Attributable revenue tumbled 75 percent year-on-year to HK$603 million in the six-month period as operating profit skidded 40 percent to HK$412 million, Wharf said in a filing with the Hong Kong stock exchange. The COVID resurgence was keenly felt by the group’s portfolio of mainland development properties, which saw revenue fall 29 percent to HK$5 billion and operating profit dive 44 percent to HK$609 million.

“Dynamics of the residential development property market have shifted markedly against the developer,” director Kevin Hui said in the filing. “In addition, unwelcomed spurts of the pandemic drastically slowed down selling activities and also affected construction, particularly in cities such as Suzhou, Shanghai and Beijing.”

Single Unit Saves Face

Transaction volume and value from Wharf’s Hong Kong properties fell sharply from a year earlier to a single new sale, a high-floor apartment at Mount Nicholson, in the first week of 2022.

The home on posh Victoria Peak sold for HK$583.2 million ($74.8 million) to an undisclosed buyer who paid HK$137,872 per square foot for Unit 15C. The transaction was the second biggest ever on a unit area basis for an apartment in Asia, eclipsed only by last November’s purchase of Unit 16D, which sold for HK$140,800 per square foot to a buyer later revealed to be Heungkong Group heiress Lau Chauin.

The Mount Nicholson project had chalked up three sales totalling HK$1.69 billion in 2021. Wharf also sold six houses for a combined HK$3.9 billion at its 77/79 Peak Road project last year.

For the group’s mainland investment portfolio, COVID controls and a flagging economy inflicted the first reversal in recent years. First-half revenue fell 4 percent year-on-year to HK$2.6 billion while operating profit was stable at HK$1.8 billion.

“Tenant sales and turnover rent were disappointing,” Wharf said. “Consumers are wary and cautious even with the government stimulus, portraying a slower recovery compared to that in 2020.”

Retail occupancies at Chengdu IFS and Changsha IFS stood at 94 percent and 98 percent respectively at the end of June. Office occupancies showed strains from oversupply, reporting 80 percent and 69 percent respectively.

Hotels Unfavourable

The five luxury Niccolo Hotels and 11 Marco Polo Hotels operated by Wharf in Hong Kong, mainland China and the Philippines reported an unfavourable first quarter but started to improve in the second quarter, the group said. First-half revenue in the segment declined 36 percent year-on-year to HK$167 million as an operating loss was sustained.

In the logistics infrastructure segment, revenue increased 13 percent year-on-year to HK$1.5 billion and operating profit shot up 41 percent to HK$396 million. Cargo volume in South China increased during the first half, but Hong Kong lost volume and market share.

Heightened quarantine requirements for air crew and supply chain disruptions slowed the air cargo business of HACTL, in which Wharf holds a 20.8 percent stake. Total cargo handled fell 10 percent year-on-year to 800,000 tonnes in the first half.

“As major developed economies grapple with inflation, interest rate hikes and recession fears, structural diversification and reshoring of production may cause seismic movements while global restructuring of supply chains may weaken demand for China’s production and logistics capacity,” Wharf said.