Hutchison Net Beats Estimates on U.K., China Investments

Hutchison Whampoa Ltd. (13), billionaire Li Ka-shing’s biggest company, posted first-half profit that beat analysts’ estimates after boosting earnings from U.K. utilities, phone services in Europe and retail stores in China.

Net income was HK$10.2 billion ($1.3 billion), or HK$2.39 a share, the Hong Kong-based company said yesterday. That beat the HK$9.55 billion median of five analysts’ estimates in a Bloomberg News survey. Profit fell from HK$46.3 billion a year earlier, when Hutchison booked one-time gains from a spinoff of ports assets in Hong Kong and China.

Earnings were helped by investments in electricity, water and gas networks across England, and demand for services from British smartphone users. Li, 84 and Asia’s richest man, plans to make more acquisitions in Europe and add cosmetics stores in China to reach consumers in the fastest-growing major economy.

“In telecommunications, they have stabilized their business compared with previous years,” said Kalai Pillay, senior director at Fitch Ratings in Singapore, who assesses Hutchison’s debt. “In Europe, part of their strategy is to go into very stable businesses” including retail and utilities, he said.

Hutchison fell 1.2 percent to HK$68.65 in Hong Kong yesterday, before the earnings announcement. The stock has gained 5.5 percent this year, trailing the 6.8 percent increase in the benchmark Hang Seng Index.

‘Improve Performance’

“Despite the difficult economic situation in Europe and continued uncertainty in the global financial markets in the second half, barring unforeseen material adverse circumstances, I expect that the Group’s business performance will continue to improve,” Li said in the statement.

Li is 14th on the Bloomberg Billionaires Index with a net worth of $24.1 billion. Nicknamed “superman” by the local media for his investing prowess, he opened a plastic flower factory following World War II and began focusing on Hong Kong real estate in 1967 after riots from China’s Cultural Revolution depressed prices.

Hutchison said its 3 Group telecommunications business in Europe earned HK$1.37 billion before interest and tax in the six months ended June 30, or 51 percent more than the year-earlier period. Hutchison owns phone units in six countries in Europe including the U.K., Italy, Austria, and Ireland.

The mobile-phone division posted its first annual profit in 2010, seven years after starting services.

The U.K. phone unit of Hutchison has a market share of 28 percent among users of Apple Inc.’s iPhone smartphone in the country, according to a July 25 report by Morgan Stanley.

Generate Returns

The increased earnings from the mobile-phone operations in the first half was “only the beginning,” Managing Director Canning Fok said at a briefing yesterday. The division has cut costs and improved its networks, and is expected to generate “returns for investors,” he said, without giving a timeframe.

Hutchison doesn’t plan to enter new phone markets in Europe and is no longer interested in renewing a bid for Eircom Group in Ireland, Fok said.

European phone markets offer opportunities for consolidation, Hutchison’s Finance Director Frank Sixt said.

Hutchison, with investments in ports, telecommunications, utilities, retail, property and energy in more than 50 countries, increased first-half revenue by 3 percent to HK$115.7 billion from HK$112.3 billion, it said.

Cheung Kong Infrastructure Holdings Ltd. (1038), the roads and utilities arm of Hutchison, last month said first-half profit rose 18 percent to HK$4.7 billion. Cheung Kong Infrastructure is leading a group of Li-affiliated companies that agreed to pay 645 million pounds ($1 billion) for gas networks operator Wales & West Utilities Ltd., after acquiring Northumbrian Water Group Plc and the U.K. power networks of Electricite de France SA in the past two years.

Retail Growth

Husky Energy Inc. (HSE), the Calgary, Alberta-based oil producer part-owned by Hutchison, last month reported second-quarter profit fell as crude prices dropped. Hutchison, owner of Hong Kong’s PARKnSHOP supermarket stores, the A.S. Watson cosmetics chain and brands including Marionnaud, said its retail division’s earnings before interest and tax rose 12 percent to HK$4 billion.

Hutchison is interested in acquiring a stake in Manchester Airports Group, Fok said on July 29. Manchester is one of Britain’s busiest airports outside of London.

Phone unit 3 Austria is seeking European regulatory approval to acquire Orange Austria in a transaction valued at 1.3 billion euros ($1.6 billion).

-- with assistance from Billy Chan in Hong Kong. Editors: Subramaniam Sharma, Suresh Seshadri

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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