Hutchison Port Holdings Trust
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(Extracted From Annual Report 2015)

TOP LINE CONTINUED ON STABLE PATH; OPERATING PROFIT HEALTHY

In 2015, the Trust recorded growth in operating profit amidst a lacklustre year for the shipping industry. Despite a drop in transshipment volume resulting from service rationalisation by shipping lines through alliance formation and slot sharing agreements, the Trust was successful in raising tariffs for customers upon contract renewal and maintained revenue and other income for the full year 2015 at HK$12.6 billion, whilst also managing to gain market presence in both Hong Kong and Shenzhen.

During the fourth quarter of 2015, HPH divested its interests in Zhuhai International Container Terminals (Jiuzhou) Limited ("Zhuhai Jiuzhou Terminal"), one of the river ports in which the Trust derives its economic benefits. The Trust received HK$347.2 million, representing its share of the consideration from HPH for cessation of the economic benefits, and recognised a gain of HK$155.5 million in the same quarter, after fully recovering its original investment valued at the time of initial public offering.

Net profit after tax ("NPAT") for the full year 2015 was HK$3.0 billion – a 119.0% increase from 2014. Net profit attributable to unitholders was HK$1.7 billion, up 110.1% from 2014. This takes into account the one-off items which include the gain from the cessation of River Ports Economic Benefits in Zhuhai Jiuzhou Terminal and additional depreciation due to the change of an accounting estimate in 2015; and the HK$19.0 billion goodwill impairment and net gain from the disposal of a 60% effective interest in ACT in 2014. Net of the one-off items, full year NPAT for 2015 was HK$2.9 billion, up 6.5% from 2014, while NPAT attributable to unitholders rose to HK$1.6 billion, a 2.9% increase when compared to the previous year.

This increase in attributable NPAT of 2.9% was also made possible by improved cost management. Overall operating expenses from regular operations, net of the one-off items, for HPH Trust for 2015 were HK$8.4 billion. Improvements in operational efficiency and lower fuel prices helped mitigate the increase in external contractor costs and inflationary pressure, resulting in a 3.7% decrease in overall expenses year-on-year. As a result, operating profit for the full year 2015 improved by 8.0%.

THROUGHPUT CONSISTENT AMIDST GLOBAL ECONOMIC UNCERTAINTY

Compared to 2014, throughput at HPH Trust's deep-water ports fell by 1.3%, handling a total of 23.9 million TEU. Combined throughput at HPH Trust's Hong Kong ports fell 6.4% year-on-year, whereas throughput for the overall Hong Kong market decreased by 9.5%. The drop in throughput at HIT was mainly due to weaker transshipment and intra-Asia cargo volumes, a result of more efficient alliance operations and vessel slot sharing agreements.

YICT's throughout rose 4.2% year-on-year, outperforming Shenzhen's throughput increase of 0.7%. Throughput growth at YICT was primarily driven by transshipment and empty cargoes as growth in U.S. laden volumes was partially offset by declines in European trade.

Revenue contribution from HPH Trust's China operations continued to grow, representing 59.6% of full year revenue, from 57.8% in 2014.

Continuous infrastructure improvements and enhanced operational efficiencies enabled HPH Trust to maintain its outstanding performance within the PRD in 2015, and to stay ahead of continued economic uncertainties and changing industry demands.

HEALTHY CASH BALANCE PAIRED WITH STABLE DISTRIBUTIONS

HPH Trust concluded 2015 with a healthy cash balance of HK$6.8 billion. Cash generated from operations in 2015 totalled HK$6.8 billion, with net cash from operating activities at HK$5.0 billion.

In 2015, HPH Trust recommended a total payout of HK$3.0 billion in distributions to unitholders, translating to a DPU of 34.4 HK cents and a distribution yield of 8.3% based on the market price of US$0.53 on 31 December 2015. The Trust's units remain attractive when compared with the average yield offered by STI component stocks.

In view of the expected soft global trade outlook, the Trustee-Manager will continue to adopt prudent cost and cash flow management to maintain stable cash distributions.

BALANCED CAPITAL STRUCTURE

HPH Trust maintains a balanced capital structure with leverage of about 53%. Short-term debt forms around a quarter of total consolidated debt. HPH Trust's total outstanding bank loans amount to HK$33.1 billion, with the majority of them unsecured. Details of the bank loans are set out on page 101 of the Annual Report.

OUTLOOK FOR 2016

U.S. volumes are expected to grow by a low-to-mid single digit percentage in 2016. Forecasts indicate that the U.S. will continue on its gradual recovery path that first began in late 2014, with anticipated increases in consumer spending and employment. This is expected to positively impact outbound cargoes to the U.S.. A slowdown in China and a weaker Renminbi (“RMB”) may be a stimulus to export trade and offer slight easing of cost pressures in the Trust’s China operations in the medium term. However, it is expected that fluctuations in the RMB will contribute to market volatility in the immediate and short term.

In Europe, all signs point to a slow recovery, with low oil prices and a weak euro providing momentum for growth. European volumes are expected to stabilise in the second half of 2016, with potential for some uplift toward the latter half of the year.

In Hong Kong, we expect volume to remain flat as alliances continue with service rationalistion.

HPH Trust will continue to enhance its mega-vessel handling capabilities by rolling out an additional mega-vessel berth in YICT under the YICT Phase III Expansion.

By retaining its strong fundamentals and focusing on tariff and cost improvements, along with traditional practices of properly managed financing arrangements and capital expenditure, HPH Trust will continue to follow a steady and sustainable path of growth, while ensuring stable annual distributions to unitholders.