Hutchison Port Holdings Trust

Ladies and gentlemen, welcome to the conference call of Hedgeson Port Holdings Trust, Earning Results Announcement for the year end 31st December 2025. Now, I will hand over to Mr. Albert Chow, the CEO of Hedgeson Port Holdings Trust. Mr. Chow, please begin.

Thank you. Hello, everyone. Thank you for joining our 2025 results announcement call. As usual today, I'll give you kind of a lowdown as to, you know, how the second half of last year went, as well as giving you some thoughts as to how I see 2026. And then I'm going to talk, obviously, a little bit about the DPU distribution and how I see it going forward. And then I'll hand over to Ivy of CFO to quickly cover the figures. And then we'll finally end it with Q&A, depending on where what you guys want to ask me about. Overall, if you kind of look at our results, you would say I'm actually overall pretty happy with the 2025 results. It was obviously a fairly difficult year. The shipping market was particularly volatile given what's happening around the world, the geopolitical tensions, the tariff war, and all the things that's happening around the world has had an impact to the stability of the shipping industry and the movement of goods overall. So despite, you know, kind of all of that, we achieved a throughput growth above 3%, whereas most of our growth or almost all of our growth is driven by the growth in Yantian, almost 7% year-on-year growth, while Hong Kong, you know, kind of continues its decline that we have seen, you know, over the last couple of years. And I'll talk individually about them as well. But overall, if you kind of look at the individual trade, if you will, obviously, U.S. is affected significantly by the tariff imposed on China as well as other parts of the world. So if you look at the U.S. trade alone, especially export from Yen-Ten is almost down, you know, 10%. You know, the good thing is, you know, China export to the rest of the world, including Europe, continues to do quite well. in 2025, and Europe was a bit of a surprise. It actually increased 14% year on year in 2025, you know, despite whatever's happening around the Red Sea and around the Suez Canal. So we can actually definitely see that China is actually pivoting away from, you know, relying on the U.S. market alone, but growing substantially is Europe, Middle East, and Southeast Asian trade. And for Yantian, other than export, Yantian has also benefited a lot from the Gemini lines, which I talked about last year as well. Yantian was picked as the transshipment location for South China, and Yantian picked up a lot of transshipment, including some of the transshipment from Hong Kong as well. So in some sense, you can look at there has been some shift of volume from our Hong Kong operation into Yantian. And overall, the trust, you know, it doesn't really suffer from that transition because, you know, Yantian margin is as good as Hong Kong. So overall, I think we did quite well. Obviously, we have, you know, refinancing done last year, which, you know, kind of increased our interest rates. And, you know, in 2026, we have two more refinancing to be done as well. And so we are definitely on the lookout on, you know, how interest costs is going to affect us going forward. But overall, as I said, you know, we did quite well. Overall, 2025, year on year, from a profitability standpoint, we've done okay. You know, I'll talk a little bit about DPU, obviously. We've decided on a four-year distribution of 11.5 cents, Hong Kong dollar cents per unit, which is, you know, slightly lower than what we had in 2024 of 12.2. So it's about, you know, 4%, 4%, 5% decline versus last year. And there are a couple of reasons for that. Obviously, you know, it is still within what I was hoping for. So we have done well on the profitability front. So our cash flow actually increased as a result of, you know, higher profitability. but it is negatively impacted by two things. Number one of all, obviously, when we refi our average cost of borrowing increase last year, you know, despite us, you know, paying down debt, that offset some of it, but interest costs, it has gone up, number one. Secondly, we're also impacted by the fact that Yantian, you know, starting with 2025, we've started with the making statutory reserve in our Yantian operation, where, you know, previously with foreign joint venture, we were accepted from the statutory reserve. But because China changes company law, we are no longer, Yantian is no longer accepted from making these statutory reserves. So we have to start making that, you know, 10% reserve in 2025. And that, in some sense, reduced our ability to dividend out almost close to about $200 million in distribution, and that affected almost close to around $0.02 of DPU right there. So in some sense, the profitability growth offset some of that statutory reserve requirement, and we ended up with a slightly lower DPU compared to last year. But looking at the upside, I suppose, you know, we've managed the interest cycle very well. Most of our borrowing were done five years ago when interest rates were around, you know, inclusive of the margin. We were playing close to around 2% interest costs on average. And with the refinancing, we're now looking at, you know, 4% to 5%. But I think with the final two refinancings, done this year, we would have reached the, I suppose we would have fully moved into the current interest cycle. And with the expectation that, you know, Fed rates will come down hopefully further in 2026, I think this would be the peak of our interest costs in 2026 and maybe 2027. And if, you know, if we can continue to grow on a volume and profitability front, then possibly 2025, 2026 will be kind of like the bottom year of our DPU, and then we can start growing DPU again based on profitability. And looking out for 2026, so far, obviously looking just in January alone, things are still good. Chinese New Year, there's been a slight rush in Chinese New Year, but I think a lot remains to be seen what happens after Chinese New Year. you know, will U.S. pick back up again? You know, some of the, you know, new trade agreement that China will have with Europe, with Canada, will those pan out? Meaning that will other trade continues to climb to offset some of the U.S. decline or will U.S. consumption kind of stabilize with interest rate coming down? All those questions will be on the lookout for in 2026 as well. But, you know, With those trade agreements that China will strike with the various countries, one of the things that we'll be on the lookout for is obviously on imports. Imports have been fairly weak for the last two years just because of the economic situation in China. So import has been on a decline. But I think that with these new trade agreements that China will have with Europe, with Canada, with the rest of the world, I believe that China will not be forced, but they will be looking to boost up their import to honor some of these trade agreements. So we would be looking out for increases in import probably in the second half of this year. And currently there is a large trade imbalance. where our export outweighed our import almost 80-20. So there was a lot of room to grow in terms of the import side, and that's something to watch for both Hong Kong and Yantian. Hong Kong is actually quite suitable for import, and the lower import is actually hurt in Hong Kong. But if I talk about Hong Kong alone, last year, yes, volume has come down. But if I look at the silver linings, of the Hong Kong volume, you would see that export and import coming into Hong Kong has actually remained stable. It has not declined any further like what we have seen in 2023, 2024 after COVID. So the local market import-export has actually stabilized in Hong Kong. What Hong Kong has been losing in 2025 was mostly transshipment volume as well as some intra-Asia volume. But mostly on the transshipment side, as I alluded earlier, a lot of that transshipment either shift to Western Shenzhen or to Yantian. So, you know, whether Hong Kong 2026 will be kind of like the bottoming out of Hong Kong remains to be seen. But I think Hong Kong has been in a transition over the last two years. And not just on the port alone, but on the whole of Hong Kong. I think the economy is starting to rebound a little bit. Our property is on the rebound a little bit. And, you know, we're looking at to whether, you know, we can have Hong Kong kind of like remain, you know, stable this year and try to regrow that business together with Yantang going forward. So I'll pause here, and then I'll hand it over to Ivy to talk a little bit about the P&L, and then we'll move on to the Q&A. Thank you.

Hi, everybody. Basically, if we talk about throughput, as Iris mentioned, trust has done well for 2025. So throughput is at 23 million, 3% better year-on-year, with Yen Teng growing by 7%, but offset by the drop in throughput in Kuai Ting by 6%. If we look at the revenue front, total revenue is at 11.9 billion, 3%. improvement year-on-year. In terms of the segment information, pretty much the split between Hong Kong and Chinese mainland is roughly comparable to 2024 with a 2% point increase in Chinese mainland for 2025. On total capex, it's 445 million, a 20% year-on-year increase or equivalent to around 74 million Hong Kong dollars. The increase is just largely due to operational upgrades that have been carried out both at Yantian and Hong Kong, such as heightening our QCs and just making improvement to support our conversion to using remote RTTCs, et cetera. If we move on then to just look at our financial position in terms of debt, What you'll see in 2025, the short-term debt has increased, but that's largely just due to the two guaranteed notes that we have expiring in 2026, one in March and then one in September time. But if you look at the total consolidated debt, because we have continued with our deleveraging program of repaying $1 billion loan, so the total consolidated debt actually dropped 4% year-on-year, to around 24 billion. And with the increase in cash that Ivo has mentioned earlier, the net attributable debt has actually dropped by 6% year-on-year to around 17.9 billion. As Ivo has mentioned, the trust will be declaring a DPU for the end of 31 December 2025 at 11.5 Hong Kong cents. and we'll be making that distribution payment on 27th of March, 2026. So, lastly, I just want to go through quickly the trust P&L. As mentioned earlier, in terms of revenue, we had a 3% year-on-year increase. In terms of operating expenses, we actually have a 1% improvement, so that gets us to a total operating expenses of around $7 billion. with operating profits having an 8% year-on-year growth to $4.7 billion. As Ivor mentioned, well, despite the fact that we refinanced our debt in February at a higher rate, overall interest costs for the trust actually recorded a 6% saving, largely because of the lower average highball during 2025, which benefited from our highball-based bank loans plus the deleveraging that I mentioned earlier on the $1 billion repayment. So profit before tax is 12% better at $3.8 billion, and then profit after tax is 13% better at $2.5 billion, resulting in a profit after tax attributable to our unit holders at $748 million, 15% better year-on-year. And that concludes our update on our results.