Wharf Holdings Warns of Full-Year Loss as Mainland Sales Dry Up

Wharf Holdings is bracing to report a full-year loss for 2022 after a slowdown in the Hong Kong developer’s mainland China business.

The blue-chip builder majority-owned by Peter Woo’s Wheelock and Company may post a loss for the 12 months ended 31 December 2022, swinging from the previous year’s profit of HK$6.02 billion (now $770 million), according to a filing with the Hong Kong stock exchange.

“The very weak market for mainland development properties throughout 2022 resulted in much lower sales volume and weaker prices,” Wharf said. “Sales recognition was affected. Non-cash and unrealised impairment provisions also became necessary.”

The group’s overall financial position remains healthy despite the setback, said Wharf, which expects to publish its audited results in March.

Revaluation Deficit Widens

Wharf Real Estate Investment Co, a Wheelock-controlled commercial spin-off, issued a separate announcement warning of its own likely full-year loss, reversing a HK$4.39 billion profit booked in 2021.

Preliminary findings from a semi-annual independent revaluation of Wharf REIC’s investment properties indicated that the revaluation deficit for 2022 may be more than double the previously reported figure for the first six months of the year.

“Capital values for Hong Kong investment properties have been soft,” the company said, adding that revaluation deficits are non-cash and unrealised items and that its overall financial position remains healthy.

Wharf REIC, whose properties include the giant Harbour City mall and hotel complex, reported last September that the company’s net asset value had dropped to less than HK$200 billion for the first time since listing on the HKEX in 2017.

Pandemic Paralysis

Wharf’s warnings come after the developer last August reported a first-half underlying profit of HK$428 million, improving on a year-earlier loss of HK$360 million but marking a significant slowdown from the HK$3.65 billion posted for the whole of 2021.

“Dynamics of the residential development property market have shifted markedly against the developer,” director Kevin Hui said in August. “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.”

Wheelock’s Woo in September made a rare call to end the inbound travel restrictions in place in Hong Kong at the time, arguing that the city was falling behind other markets where movements were less controlled.