(Extracted From Annual Report 2022)
In 2022, a host of global and industry challenges tested the resilience of the global port business. Inflation, high interest rates, rising energy and commodity prices, geopolitical flux, and the continuing impacts of the COVID-19 pandemic created a complex business landscape to navigate.
However, HPH Trust’s versatility and commitment to prudent financial management served itself well. Despite the difficulties, HPH Trust is well placed to take on new challenges and opportunities in the year ahead.
Throughput Slowed Amid Pandemic And Inflation
The past financial year was marked by operational and financial flux. Under the high inflationary environment and inventory level at destination countries which led to weakened consumer demand in markets worldwide, during the year under review, throughput for the ports of HPH Trust was 22.7 million TEUs, a drop by 7% compared to 2021. Outbound cargoes to the US and Europe dropped by 12% and 13% respectively. YANTIAN’s throughput fall was mainly attributable to lower US and Europe cargoes. Throughput at Kwai Tsing Terminals recorded an 11% drop in 2022, due to the reduced cross-border road traffic as a result of the stringent pandemic control measures in place after Hong Kong was hit by the fifth wave of COVID-19 in early 2022.
Average revenue per TEU for YANTIAN was below the 2021 level, mainly attributed to stabilised storage income after unusual high storage income in 2021 and depreciation of Renminbi. Meanwhile for Kwai Tsing Terminals, average revenue per TEU was slightly above 2021 level. Across the full year, revenue and other income totalled HK$12,166.2 million – a decrease of 8% compared to HK$13,244.1 million in 2021 – as a result of lower throughput.
Mixed Operating Results In A Complex Business Environment
The cost of services rendered in 2022 was HK$4,174.5 million, 7% drop from HK$4,474.7 million in 2021 as a result of lower throughput. Efficiencies created by Hong Kong Seaport Alliance (“HKSPA”) and other cost-control initiatives also partially offset general cost increases.
Staff costs of HK$265.7 million marked an increase of 3% compared with that of 2021 primarily due to inflation. Depreciation and amortisation was HK$3,004.0 million, 2% below the previous year.
Other operating income in 2022 was HK$146.2 million, a 65% drop from HK$417.9 million in 2021. The decrease was mainly due to higher government subsidies received in 2021. Other operating expenses totalled HK$587.3 million. This marked a 17% increase against HK$500.4 million in 2021, mainly attributable to exchange loss arising from revaluation of Renminbi denominated assets.
Total operating profit was HK$4,280.9 million - a HK$1,097.9 million or 20% decrease from 2021. Profit for the year was HK$2,519.7 million, a decrease of HK$1,007.5 million or 29% compared to 2021.
Profit attributable to HPH Trust unitholders was HK$1,099.0 million, representing a decrease of HK$648.2 million or 37% from 2021.
Financial Prudence Continues
Despite the backdrop of the COVID-19 pandemic and increasing global economic challenges, HPH Trust has maintained financial prudence and maintained a good financial position. At the end of 2022, HPH Trust had a total cash balance of HK$10,395.2 million, which was HK$652.8 million less than in 2021. This resulted in HPH Trust having HK$16,744.8 million in net debt by year end, a 7% decrease against 2021.
During the year, HPH Trust diligently continued its debt repayment strategy implemented since 2017, to repay a minimum of HK$1 billion of debt annually. As a result, total borrowings decreased by HK$1.9 billion to HK$27,140.0 million as of 31 December 2022, down from HK$29,038.0 million at the end of the previous year. The impact of interest rate rises on HPH Trust’s borrowing cost was relatively small as over 70% of debt had a fixed interest rate. During the year, the Trust obtained new bank loans of approximately HK$5,300 million and repaid bank loans of approximately HK$3,298 million and redeemed guaranteed notes of US$500 million.
HPH Trust has recommended a total payout of HK$1,263.1 million for 2022, which arrives at a distribution per unit of 14.5 HK cents. Based on the US$0.194 market price as at 31 December 2022, the distribution yield stands at 9.6%.
Outlook
Multiple events clouded the 2022 global trade environment and the ensuing uncertainty is reflected in the year’s financial results. Despite the recent relaxation of pandemic preventive measures in mainland China and Hong Kong, it will take time to return to a prepandemic normal. The impact of high inflation on market sentiment and operating costs, geopolitical tensions as well as supply chain flux is likely to continue in 2023. The global supply chain and the port industry can expect another year of challenging business conditions.
As ever, HPH Trust is steadfast in maintaining efficient, effective and stable operations based on a commitment to rigorous capital management, shrewd spending and meticulous cost control. In the new year, HPH Trust will continue to help smooth the challenges in global supply chains by operating its terminals to bring the greatest value to its stakeholders. Most importantly, HPH Trust has healthy financial fundamentals that provide a secure platform for the business to explore and embrace new opportunities with precision and confidence.