Swire Pacific Ltd A

Good afternoon, ladies and gentlemen. Welcome to Swire Pacific 2025 Annual Results Analyst Briefing. Joining us at the briefing today are Mr. Guy Bradley, Chairman of Swire Pacific, Mr. Martin Murray, Finance Director of Swire Pacific, and Ms. Karen Tso, Chief Executive Officer of Swire Coca-Cola. Before we take a detailed look at our annual results for 2025, we'd like to show you a short video highlighting Swire Pacific's key developments and achievements of the year. Enjoy the video. May we now invite Guy, Martin and Karen to take us through the details of the annual results of 2025.

Good evening, everybody, and thank you for joining us. Let's get straight in and I'll start with the strategic highlights. I think you can see that we've basically been delivering across the business on our growth strategy in each of the different core businesses under the Swan Pacific name. On property, we've We've got a very healthy pipeline of new projects on the way. We continue to do effective capital recycling of non-core assets. Importantly for us, we're continuing to invest in the Greater Bay Area, which is a stated objective of the property team. And we were very pleased last year to launch our first residential project successfully, I would say, in Shanghai in the Chinese mainland. So property is very much on strategy and continuing to deliver good growth. Beverages, it's been a tough year in 2025 in terms of the environment. But I think you can see the resilience of the beverage business for us. We continue to invest through the cycle here. And that investment has been in new plants, new equipment in both the Chinese mainland and in Vietnam so far. And we continue to... to try to integrate the new Southeast Asian franchises that we've successfully acquired over the last few years, specifically Vietnam and Thailand. On the aviation front, the story has been very good. Heiko completed the sale in November last year of its USA business. So now the strategy is to focus the business on Hong Kong, the Chinese mainland and future opportunities in Southeast Asia. So we're very focused at Heiko. And as you heard yesterday, the Cathay Group is investing in more than 100 new generation aircraft and improving its products with a capital program there. So very good results on the aviation side. Talking numbers briefly here, the underlying profit was very pleased to see it was up 9% to 11.4 billion, driven mostly by capital recycling and, as I mentioned, strong recurring profit in aviation. That translates for us into a 13% increase in the ordinary dividend, which I think is very healthy. And you can see our financial health is strong with a good deal of available liquidity and a gearing ratio of 20.6%. looking at the recurring underlying profit um of 9.8 billion it's five percent up on uh last year driven by high demand for air travel and the very resilient performances as you've seen from both the property and beverages divisions The Hong Kong office market, which has been a very core component of the property business, saw a very steady occupancy in 2025. And I think what we've seen in the soft cycle that it's at is a continued flight to quality. And the new buildings that Swire Properties has been investing in are benefiting from that flight to quality trend. I think we can see signs of a retail pickup, both in Hong Kong and in the Chinese mainland. And residential projects, obviously in Shanghai, is nearly fully sold. But I think the sentiment in the Hong Kong residential market is also starting to pick up. On the beverage side, 2025 was a solid performance, fairly flat delivery of recurring underlying profit, but we do feel conditions are set to improve. Aviation up 19% at the RUP level. Heiko Group achieved a 73% growth in recurring profit due to demand for base maintenance and engine overhaul services. And Cathay, as you know, has a third consecutive year of profit driven by very robust demand for travel and strong cargo performance. I think I'll pass over to Martin now for a little detailed look at the financials. Martin.

Thank you.

Thanks, Chairman.

Yeah. So, again, just highlight, we think they're very strong, good results. The strong underlying profit driven by the underlying profit growth in properties. um in the aviation side it's more on the recurring profit level continued three years of really strong recurring profit from aviation and solid beverage results the statutory profit adjusts for the fair revaluation losses of the investment properties of such to fair value you can see the strong cash generated from operations which comes from the particular particularly the sale in Miami and also the full year of the Thailand subsidiary. And these strong results have enabled us to continue a progressive dividend, which the dividend up 13%. And this slide basically highlights the strong underlying profit per division. So you can see there the two blues are the things that are driving that. So the big one is the 27% increase in small properties underlying profit. Aviation has been driven, as I said, by a strong recurring profit. And the two red boxes are really the offset, which is the absence of revaluation gains that we talked about last year in beverages and T&I. This slide is the same, but it breaks it down by category. So in terms of the non-recurring items, we had the gain on disposals of the investment properties, which was driving the strong underlying profit from small properties, which was the sale of the Brickell City Centre in Miami, the Ching Yee Industrial Estate, the 43rd floor of One Island East, and more Tai Koo Shing car parks that have been going for a number of years now. We have the gain and losses on disposal of property, plant and equipment. This again driven by the loss on disposal of HECO America, partly offset by a gain in the sale of the ITM business. We've got exchange losses in Thailand and the fair value loss of Cadala and the reverse of some impairments in the CX subsidiaries. And then you've got the fair value loss in the Hong Kong offices getting you back to the statutory profit. This slide, I've just shown you the five years of underlying profit because it really kind of highlights, one, the post-COVID three strong years of recurring profit driven by the good results from aviation. Over that five-year period, it really sort of highlights the strategy of recycling non-core assets and exiting businesses. So back in 2021, we exited the marine side of things. You can see over the period, we've We've focused our strategy on Greater China and Southeast Asia. So we've exited our non-core US businesses, which in 2023 was Coca-Cola USA. And then, of course, HECO Americas this year. And we've tidied up some of the underperforming assets over that period. So we really have three very strong divisions currently. To liquidity and maturity profile, a very healthy liquidity piece, December 25, group liquidity at 64 billion and bank balances at 23 billion and a healthy maturity profile with the average term of debt of three and a half years. In terms of financial position, our net debt is 65 billion, which is down 8%. Weighted average cost of debt, 3.6%, down from 4%. The 73% of our debt is fixed and the gearing is down to 20.6%. This slide really looks about how we do our capital allocation, which again, we take a medium term view on that piece. So we can write economic cycles. So our strong balance sheet is the core of our ability to have our capital allocation. So healthy gearing, low cost of debt, and fixed borrowings on that side. Our first priority is looking at long-term strategic investments in our core markets, whether they be assets within the 100 billion plan within Swire Properties, the new franchise as we roll out in Southeast Asia and Swire Beverages, and Heiko moving its Xiamen investment. Then we look at the trying to improve the return on investments from each of the operating companies. So each of the operating companies target efficiencies and improve margins. So our properties are doing more residential trading than they had previously as part of the portfolio to improve their returns. And then finally, that drives the ability to have a sustainable dividend policy. And as we've done in the past, we have the possibility of shared buybacks as part of the armory that we have. Again, like the Swire Properties one, they've had nine years of consecutive increasing in dividend. We changed our dividend policy five years ago, so we pay out not less than half our recurring underlying profit, excluding our share in Cathay, but a pass-through of all dividends received from Cathay over time. And that's allowed us to also have a progressive dividend policy, which, as you see, was up 13% from last year. We're very proud of our sustainability progress throughout the group. We've rebranded it SD 2050. And again, it's under the pillars, but mainly following what the regulatory is going. So under climate, nature, which is water and waste, and social people and communities. We're doing really well towards our 2030 targets that are on the left there. So we're already at 46% reducing our scope one and two to our 50% target by 2030. 64% waste is diverted from the 65% target for 2030. 27% reduction in water withdrawal compared to the 30% reduction. We've achieved our 30% females on the board. And again, we make a positive impact to the communities and we've made over 120 million of donations from Swire Trust.

Thanks, Martin. On the property side, I'll just do a quick review of that, given the fact that Swire Properties have just spent an hour talking about that in detail. At an overview level, the underlying profit increased by 27%, as you know is primarily driven by the gains of the disposal of non-core assets at the recurring underlying profit level is a small decrease which is mainly due to the loss of rental income from the sale of brickle city center retail mall and and lower office rental income in hong kong Very good story on the Chinese mainland. Over the 10 years, attributable gross rental income has grown at a CAGR of 10%. And we anticipate with all the new construction projects that are underway that we will double our GFA in the near term. And that's an incredible performance, I think, when you take a look at the last few years. So very happy about the direction that we're heading in the Chinese mainland. In Hong Kong, where we've had a tough time with the cycle, we have a very strong defensive position, I think, here. In Hong Kong office, the occupancy levels are very high and we look very well positioned, I think, to capture the recovery in demand when it does come. On the retail side, our malls are 100% let. And the retail sales are outperforming the market at the moment. So small signs of retail recovery, I think, in Hong Kong. We've talked a lot about the 100 billion commitments for Swire properties that was set in 2022. As you heard Tim say a few minutes ago, we're now about two thirds committed on that. And most of the Chinese mainland commitment has already been made. So very good progress along that investment plan. Finally, on strategic updates, the focus remains the disciplined execution of that $100 billion investment plan across the core markets of Soraya Properties. In the Chinese mainland, five new developments will start to open from later this year. And I think I'd just like to highlight the very successful sale of 6 Deepwater Bay Road, which was completed early this year. The sale was booked this year, but made at the end of last year at a very, very attractive price. And that is not only a good example of the way that we're able to fetch those sort of very high levels of residential pricing, but also the way that we're able to turn our capital round and I think that's been really successful and reflects the upturn I think in the level of interest in Hong Kong residential so we're very pleased about that. Finally, just in terms of the new projects, you can see from this chart that there's a very balanced geographical mix, a very balanced sectoral mix. And overall, we're hoping to add 12.4 million square feet to the portfolio over the next sort of three or four years, which I think is a great story. It reflects the pipeline that we've got. And I can sit here and say there's more to come on that. Very encouraging performance, I think, for Swire Properties in what's quite a tough consumer market, both in Hong Kong and the Chinese mainland. But we do see signs of that improving. Switch over to Coca-Cola now and ask Karen to take us through where that business is.

Thanks. Thank you. And good afternoon, everyone. I will walk through why Coca-Cola's performance in 2025 and our strategic update. It was a challenging year. Our priority were clear, deliver sustainable earnings, maintain cost discipline, and continue to invest where we see long-term values. So let me turn to our financial results for the years. In 2025, Swire Coca-Cola delivered a recurring attributable profit of $1.39 billion, broadly in line with our performance last year. This result was achieved against a very challenging operating environment across the region. The impact of those factors on underlying performance was offset by the full-year contribution from Tainan Tip, which has become a subsidiary on the 30th September 2024, and also by our continued discipline in central cost control. So let me walk you through performance by market. In the Chinese mainland, performance remained resilient. Recurrent profit increased by 1%, with revenue also up by 1% in local currency, despite a very significant disruption to the ready-to-drink beverage industry, driven by the aggressive subsidy from the food delivery platform over the summer months. Our management has responded swiftly, rolling out targeted consumer commercial initiative to strengthen the route to market model and enhancing our execution across the emerging online channel. In Hong Kong, the performance strengthened with recurring profit up by 14%, supported by higher revenue. So this reflects our strong commercial execution, effective marketing campaigns, and a favorable product mix, with sparkling juice and coffee all delivering year-on-year revenue growth. The recurring profit for Taiwan has decreased by 6%. Revenue in local currency terms was flat compared to last year. The results were mainly affected by a higher cost associated with the capacity enhancement project at our Taoyuan plant. The attributable recurring profit from Vietnam and Cambodia in 2025 was 152 million, which is a decrease of 35% from last year. Bring principally due to the very difficult operating environment. Revenue decreased by 11% in Hong Kong dollar term, which is mainly impacted by the unfair unfavorable exchange rate with the depreciation of the vitamin stone and the intense competition amid an overall contraction across the beverage industry so against this backdrop our sparkling category saw the decline in revenue and volume term the results were also adversely affected by a one-time expenses related to the relocation of our ho chi minh plant to a new plant in tannin province in thailand performance was affected by the economic softness primarily driven by the significant decline in the tourism industry So I've mentioned the recurring profit of each region, and now I would like to cover our volume performance. In the Chinese mainland, despite the market disruption, our overall volume remains flat, with sparkling category also stable. Meanwhile, I would like to mention our energy category is the star performer, which continue to show strong momentum, increasing by 53% year on year. For Hong Kong, although the volume declined by 3%, our overall revenue increased by 2%, reflecting the favorable mix and the effective pricing management. For Vietnam and Cambodia, total volume decreased by 7%, which is in line with the overall industry competition. Our EBITDA margin performance remained resilient overall. In the Chinese mainland, EBITDA margin improved to 11.7%, despite the very challenging market condition noted across the peak summer seasons. The strong revenue growth and supply chain optimization initiative in Hong Kong translate to an uplift of its EBITDA margin from 16.6% to 18%. Taiwan was adversely affected by the additional operating costs incurred for the one-time Taoyuan plant redevelopment project. Our Southeast Asian markets were affected by the intensive competition in a very difficult operating environment. So turning to the strategy, we continue to invest decisively to support our long-term growth in the Chinese mainland. As announced in 2023, Swire Coca-Cola plans to invest over 12 billion RMB over the next decade in production facility and logistic infrastructure. This has included a new production facility in Zhengzhou, Kunshan, which is near Shanghai, Guangzhou, and most recently in Hainan. The Zhengzhou facility commenced operation in October last year. New plants in Kunshan, Guangzhou are expected to begin operation in May this year, while construction of our Hainan facility is underway and scheduled to be in operational by 2028. So beyond capacity expansion, all these new facilities are designed to set new benchmarks for scale, sustainability, and innovation, supported by a unified digital foundation that enhances safety, efficiency, and operational resilience across our manufacturing network. So taken as a whole, this investment will further strengthen our manufacturing footprint, enhancing our supply chain resilience, and further support our business growth in our market. In Southeast Asia, in July last year, Swire Coca-Cola inaugurated a new $136 million US dollar flagship manufacturing plant, which is the largest of our three production sites in Vietnam. This is the first food and beverage plant in Vietnam to achieve LEED Gold Green Building Certification, and reflecting Swire Coca-Cola's commitment to innovation and sustainability. So this investment underscores our commitment to the market and support job description, and also strengthen our foundation for sustainable development. In February this year, we also completed the sale of 30% interest in the Vietnam franchise to Danantip, further strengthening the regional alignment. At a headquarter level, we have moved to a simplified regional management structure, and the appointment of the chief operating officer in December last year will further accelerate our decision-making and response to the market changes. So, overall, this reinforce our focus on discipline execution in the near term and our continued investment behind our long-term growth drivers and steadily progress in our building of a sustainable value. So now I would like to turn to Martin for Catholic Pacific update.

Thank you. So, yeah. So on to aviation, which really has been the driver of the improvement of our recurring profit over the last few years post-COVID. Obviously, the Cathay Pacific Group has been an outstanding performer. But also HECO this year. It's great to see. You can see on there the recurring profit of 1.5%. nearly 1.2 billion from Hayco. And now they've, you know, exited the US and ITM. They really are into that recurring profit should be a solid number going forward. And again, outstanding results from Cathie Pacific three years in a row. In Hayco, the pleasing bit is across all three of the core businesses, as you see on the left-hand side there. So the improvement in aviation post-COVID is finally coming through in HECO as it's cleaned up its non-core assets. And again, it's exciting times in HECO with the opening of the new Xiamen facility, which is best in class and looks outstanding, creating a lot of excitement. We've exited the US, as I mentioned, and the focus is also growing their business in Southeast Asia and Vietnam. Cathay, again, they had their announcements yesterday, another set of great results with the passenger side driven by the ASK growth, which is up 26%, had record revenue. So yields comes down as you increase your ASKs, but the load factor remained positive, which is a great sign. Cathay Cargo continued to remain strong as well, again, with an increase nearly double-digit, 8.3%. percent increase in freight ton kilometers, flat-ish load factor. And then similarly, the yield comes down with the higher capacity. It's very exciting times. They've got 100 billion investment plans announced last year. They've cleaned up their balance sheet by buying back the 50% of the preference shares, repurchasing 68% of the convertible bond, buying back the Qatar share of 9.56%, leaving our share out at 47.6%. In healthcare, we sort of step back a little bit as we wait for the valuation of healthcare investments to come off highs. And at the same time, we're learning a lot with the investments we've made. So Delta Health has become the first foreign-owned and got its class three status for cardiovascular hospital in the Chinese mainland. We've got a new professor in cardiology, so we expect that business to improve over the next few months. And in Indonesia, that's our investment, our minority shareholder in there, which is a profitable investment that we made back in 2024.

With that, I'll pass back the chairman for the outlook. Thank you. So final slide here on the outlook. Global uncertainty notwithstanding, we do think our core divisions will continue to perform well this year. On the property side, we have an exciting pipeline of new developments across all our markets. The consumer sentiment, as I mentioned earlier, we do think will continue to pick up in both the Chinese mainland and Hong Kong. Early signs of new momentum in the Hong Kong office market. And we do think that there'll be a positive contribution going forward from our residential projects that are being built. Beverages, that same consumer sentiments pick up in the Chinese mainland should impact our biggest territory for Coca-Cola. But I would say that the challenging competitive situation in Southeast Asia, particularly in Thailand, and the economic weakness in that region is expected to remain in the near term. On the aviation side, we're very excited to open a new Shaman facility later in 2026 this year, which will enhance the Heiko Shaman operational efficiency. And they continue to explore investment opportunities in Southeast Asia. On the Cathay side, both the passenger and the cargo capacity are expected to grow in 2026, although the situation in the Middle East is obviously introducing quite a bit of uncertainty for the global economy and that may impact Cathay at some point. The strategy, though, is to continue adding frequency and destinations to take advantage of the new runway at Hong Kong International Airport. So with that, I'll leave the presentation and we'll be very happy to take questions. Thank you.

Thank you, Guy, Martin and Karen.