Swire Pacific Ltd A

Good afternoon, ladies and gentlemen, welcome to slide Pacific 2026 interim results analyst briefing. Today at the briefing are Mr. Guy Bradley, chairman of slide Pacific, Mr. Martin Murray, finance director of five Pacific and Miss Karen, so chief executive officer of fire Coca Cola. Before we take a detailed look at our results, we'd love to show you a short video highlighting five Pacific key developments and achievements in the first half of 2026. Please enjoy the video. So So May we now invite Guy, Martin and Karen to take us through the details of the results.

Thank you. Good evening everybody and thank you for joining us. I will just kick off with a couple of strategic highlights here. The two points I'd like to emphasise are basically that the first half recurring underlying profit is the highest underlying profit that we've reported. and that's driven basically by consumer sentiment in all of our divisions improving and that's a very good trend to see. The second highlight of course is that we haven't stopped investing and the levels of investments that we have across all our businesses are indeed record levels of capital for the group. So two very good Highlights for the half year. If I look at the specific details across the three main divisions in property, we continue to execute against the $100 billion plan. We've currently got seven projects in the Chinese mainland under development, which is more than we've ever had in our history, and two of which will open in phases, at least start to open later this year in Sanya and in Beijing at Taiku Place. on the trading side also it's worth highlighting that we've got we're doing a lot more of that and we've got very good projects going on in Miami and Bangkok what the slide doesn't say is that we've also got quite a lot going on in Hong Kong our home base where our residential trading brand is extremely well known and well regarded and I can list 269 Queens Road East, La Montagna Headland Residences and the projects in Panhoy Street so we've got four projects there to be going on with. So quite a lot of activity on the residential trading side. Switching over to beverages, the integration of the new franchises in Southeast Asia is progressing well. We're very happy that we're able to expand firstly into Vietnam, Cambodia, and then into Thailand and Laos. those territories are in the process of integrating into our business at all sorts of levels and we're happy with how that's all going so far. Focusing on the Chinese mainland, we have a RM12 billion investment plan to open up new facilities and to invest in market cold drink equipment and we continue to push that out. On the aviation side, you heard yesterday about the Cathay Pacific Group and their $150 billion investment. But I'd just like to highlight the HACO side of aviation here. And they have a new Charman facility opening later in the year. And they've just announced a new investment in Vietnam as their first expansion of the of the base maintenance business into Southeast Asia. So lots going on. On the financial side, Martin will cover that shortly in more detail. We're very happy to report that underlying profits increased by 43% versus prior year to 7.8 billion. And in turn, we've announced a 15% increase in the first interim dividend to $1.50 per A share. Just looking at the recurring level by division, the recurring underlying profit for the first half was $7 billion which was up 48% and the positive news was across all the three major divisions as you can see here, 37% up in property, driven obviously by residential trading and that extremely good sale of the 6th Deepwater Bay Road property but also accelerating retail performance in both Hong Kong and the Chinese mainland. On the beverage side they had a good year and driven mostly by an improvement in the Chinese mainland and so IUP was up 5% in beverages and aviation 39% increase Cathay speaks for itself. You've seen that yesterday, but I'd also like to say that there's a very good sort of robust demand for Hayco and their base maintenance and engine overhaul services. So very encouraging signs across the three major divisions in terms of profit contribution. With that, I will ask Martin to dive into the financial side in a bit more detail. Thank you.

Thank you, Chip. as the chairman mentioned all the core divisions are performing incredibly well on the back of strong consumer sentiment which has led to strong profit at both the underlying and the recurring level which is very pleasing to see you can see that that leads to strong cash flow, reduced gearing which allows us to have the record investment and maintain our progressive dividend which is up 15% This slide is a bit repetitive. It shows the movement in the recurring underlying profit that the chairman mentioned was at record levels. So in the property division, up 37%, primarily driven by the residential trading profit of the sale of 60 Wodeby Road, but also the continued robust retail sales in the Chinese mainland and some positive momentum in retail in Hong Kong, which is pleasing to see. Beverage is up 5%, improving consumer sentiment in the Chinese mainland. Some more challenges in Southeast Asia, some of the commodity prices have gone up. But again, the integration of that continues to go well. On the aviation side, really strong performance, up 39% driven. mainly by the high load factors yields from Cathay Pacific despite the higher oil price in the second quarter and HECO continues to go well in both the base maintenance and the engine side. Lower interest rates helping the head office and other costs. On the non-recurring items, these are mainly from the aviation division in the first half of 2026. You'll see the $309 million and the $434 million It relates to the sale of the cafes here at the Smart Pacific level to get us back to the 45% and the 434 is the gain on the deemed disposal in cafe of Air China. Last year, the big movement came from property investment, which was the Miami sale. That's the 833 in 2025. On the liquidity piece, there is some refinancing in 2029. We're going through that process now and we'll push that out to the 2031, 2032. We have our debt has come down 4% and we average cost of debt is down as well at 3.4%. So we're in great shape on the balance sheet. Our fixed rate borrowing is at 75%. and then this is just the overall picture that we get asked about in terms of the overall strategy as I said we actively manage our balance sheet prudently our gaining has come down to 19.3% weighted average cost of debt 3.4% 75% of fixed borrowing rate our primary objective strategically is for long term strategic investments which we are doing at record levels across all our core divisions and then we focus on operational excellence driving up returns through targets from each of the businesses Roy mentioned earlier in the property business doing more residential trading for example and at the same time maintaining our dividend growth strategy and potentially looking at share buyback but it's in that order with that I will oh sorry there's a sustainability slide I do forget I apologise So we have launched our SD 2050 slide strategy and we've moved it into reporting like the IFSB so climate, nature and social so waste and water in that piece and then the left hand side you'll see our 2030 targets and on the right hand side progress against that so we've almost achieved our 2030 targets across climate and nature and hit our targets for people and focus on the community. So making strong progress on our sustainability targets. With that I'll pass back to you Jim.

Thank you. I'll just take the property side. This is a familiar chart to everybody by now but it keeps getting better. It shows that the $100 billion plan that we announced in 2022 is now almost 70% committed and that's across the three major core markets that we're invested in. A bit more detail on the next slide which shows that the pipeline is good, it's diverse and in terms of sector it's diverse in terms of geography so we're having a sort of balanced investment plan as we go forward and that's what we want to see. The first half results as I say were driven significantly by the residential profit on the trading but the encouraging note for me here for this half is that you know our rental income is going up driven by on the retail side driven particularly driven by Hong Kong and the Chinese mainland portfolios and that that's very encouraging from a future point of view. On the Chinese mainland itself, you can see now the two points here to note are that the contribution of gross rental income from the Chinese mainland is now almost half, it's at 46% and growing. And specifically, if you look at the Chinese mainland retail, it's now our biggest contributor in terms of gross rental income and that's That's an incredible performance that's grown over the last 10 years. Just looking at the Hong Kong office market, which has historically been our top contributor. Obviously, it's a cyclical soft point, I would say. We've had a good defensive position with high occupancy through that soft part of the cycle. And as you heard Tim say in the previous session, We're now sort of starting to come out of that cycle with rents starting to go up, led in Pacific Place in our case. And we think that's a good sign as we start to look ahead at the next two to three years. In terms of outlook, we think there'll be positive momentum across all the different portfolios. We've got narrowing reversions in the Hong Kong office portfolio. and as I said just now, led by Pacific Place, probably a little bit slower in Taiku Place. On the retail side, we're seeing positive growth momentum in the Chinese mainland and a sustained recovery in Hong Kong as confidence and sentiment improves. Karen, Sly Coca-Cola.

Thank you. Thank you and good afternoon everyone. So I'm pleased to report that Sly Coca-Cola has delivered a broad-based growth. This performance demonstrates our effective strategy, our resilient portfolio, and our ability to execute with discipline in a very dynamic operating environment, serving a consumer base of nearly 1 billion people. So let's look at the market overview. The first half of 2026 saw improving market conditions, particularly in the Chinese mainland, where demand rebounded in the fastest moving consumer sectors following a very challenging 2025. The China's consumer market remain broad and deep. It is also at the forefront of the digital retail space and we are closely matching consumers changing consumption habit by capturing the volume growth in the e-commerce channel, immediate consumption and also through our investment in the co-drink equipment for emerging new sales channel. The conflict in the Middle East continues to drive uncertainty in oil and aluminium prices. This is a headwind felt by the populace worldwide. While the input cost inflation has continued to weigh on our margin, particularly in Southeast Asia, we are managing our exposure through advanced purchase contracts and commercial initiatives. The consumption trends are evolving towards a better value product, By maintaining a disciplined channel packaging pricing strategy, we are capturing the growth with affordable entry path that meets the consumer needs. While the sparkling continue to remain our core growth driver, we are also rapidly growing our low and low sugar portfolio alongside the functional portfolio to meet the shifting consumer preference. This shift in our product mix is already taking place in the key markets. highlighted by our successful consumer-led rollout like Sprite Tea, our expansion to the energy category through Monster Brand, accelerated growth of the zero-calorie sparkling drinks. We invest for the long term in every market we serve. That means the disciplined capital allocation, operational excellence, and the relentless focus on innovation. In Greater China, Our major investment program, which was first announced in 2023, is well underway. We continue to advance our 12 billion RMB investment plan in new facilities and equipment in the Chinese mainland to support our expected growth. I'm delighted to report that in May, our two world-class intelligent green production plants commenced production in Kunshan of Jiangsu Province and Guangzhou in Guangdong. Together, they host over 20 production lines, and they are set to boost our total mainland China production capacity by 10%. Both of these facilities are integrating AI into our manufacturing process and are LEED Gold certified. Building on this momentum, construction is also underway for our new production facility in Hainan Province, targeted for completion by end of 27. In the Taiwan region, production upgrade work continues with a newly automated storage and retrieval system and also an accepted production line at our Taoyuan facility. Turning to Southeast Asia, we remain confident in the long-term growth potential of this market, driven by favorable demographic, the potential of growing sparkling beverages in the market with currently low per capita consumption and positive GDP growth. We have invested significantly in coaching equipment and production assets, including our new affordable small sparkling package in Vietnam. We also continue to transfer digital expertise, operation know-how, innovation from global best practice to our Southeast Asia businesses. So underpinning all of this, our investment in digital and AI, and we're building an intelligent enterprise on the foundation of modern process, So let me walk you through our financial results. Our recurring attributable profit in the first half of 2026 was HK$907 billion. representing a 5% increase from the same period in 25. This was mainly driven by the robust performance in the Chinese mainland. In the Chinese mainland, the current profit increased by 24% to HK$727 million, driven by strong volume growth across the emerging channels such as e-commerce. Our business in the first half year remained relatively insulated from the higher raw material costs In Vietnam and Cambodia, recurrent profit was down by 13% to HK$98 million. That drop was largely due to a trip out that once-off impact. A triple profit would have actually grown by 15%. In the Thailand and Laos, recurrent profit went down by 10% to HK$95 million mainly due to a lower interest income. Thank you very much. overall EBITDA increased by 11% with our margin edging up from 12.8 to 12.9%. Our strong first half performance reflected the effectiveness of our strategy and also the discipline of our commercial execution. It lays a strong foundation for the remainder of the year. However, we anticipate that The macroeconomic and geopolitical environment will remain complex. Elevated aluminum price and ongoing energy volatility will continue to place pressure on raw material and logistic expenses. While this has been present margin risk across the beverage industry, we have put in place a range of commercial and cost initiative to reduce the exposure. In the Chinese mainland, Our business is growing steadily and we're capturing category-specific growth even as broader consumer sentiment remain value conscious. In the Southeast Asia, we're confident over the long-term growth potential. In Vietnam, affordability-led growth supported by our enterprise strategy in sparkling and portfolio expansion will help us capture further growth. In Thailand, while the impact of the sugar test give caution for caution, We are encouraged by the early signs of our entrance into the energy category and we will continue to expand our low and low-sugar portfolio. Overall, we remain confident about the prospects of our market while supported by our continued long-term investment. And we will continue to innovate and transfer operational expertise to Southeast Asia. And all of this So with that, thank you. And now hand over to Martin.

Thank you. Yeah, aviation has performed exceptionally well and continues to do so. So it's fantastic to see. As Karen mentioned, all our core businesses are investing into the long term and from a HACO perspective, It's exciting times on that piece, particularly the problems I've had with cleaning that up and we've exited the US side like we did in properties, very much South Pacific focused on Greater China. And then we've got the excitement of moving the Xiamen facility that will open later this year. And then as the Chairman mentioned, in 2028, moving facilities into Vietnam. So exciting times in terms of investment in HACO. and then the Cathay Group has $150 billion committed that was mentioned earlier and it's great to see Cathay going again with Hong Kong being an aviation and financial hub and so targeting to have 150 new aircraft joining the fleet over the next 10 years and targeting 150 destinations by the end of that 10 year period. The results are very strong in both HACO and particularly Cathay. really driven by the Cathay's strong results. In Hayco you can see the base maintenance, line maintenance and engine performing well and other items coming down as we have exited the ITM program last year. On the Cathay group it really is a great story in both passenger and cargo with strong growth in capacity up 11.8%. strong load factors and higher yields across the board so first quarter very strong, second quarter was impacted by the Middle East and the higher oil price but strong load factors made it a good first half overall and the outlook again remains good for both entities and Heiko will continue, we think, to have strong base maintenance and engine services. And at the Cathy side, whilst there is still the Middle East uncertainty and a higher oil price, we expect load factors and yield to continue to be strong. With healthcare, I'll mention this very briefly. The strategy in healthcare, as we've said for a while now, is patients. as we look to expand healthcare we believe a lot of our targets are overvalued at this point in time so we really are betting down the operation side so it's great to see Delta moving in the right direction and we have a new CEO appointed to lead our healthcare business so we're heavily focused on our business that we own in Delta and learning more on that front but the healthcare business will remain a small part of the portfolio over the medium term.

Thank you so three key takeaways from what we just heard an excellent first half with very good and improving consumer sentiment we expect that consumer sentiment improvement and to translate across into the second half and we continue thirdly to with our planned strategic investment program across all of our businesses. So I'd say a very good set of results in the first half which we anticipate, barring anything untoward, will continue into the remainder of the year. Thanks very much. We can take questions.

Yes, let's take questions. Please advise your name and organization and provide your questions in English with no more than two at a time and our colleagues will pass you a mic. gentlemen in front. Thank you, Nicole.

Thank you, this is Jonny from UBS. Congrats on the good results. Two questions for me. Number one, could I ask about the exchangeable bond on CAFE? So I saw that today's share price for CAFE has already surpassed the conversion price, so I guess we will expect by the end of June next year, the company, I mean Sky Pacific, does not need to repay the exchangeable bond. and also maybe a follow-up question regarding this one is regarding on would that be also possible to consider to issue a civil bond on small properties. My second question is about given all the three business has been doing very well so it seems to me that to me that it is now in the harvest period with falling net gearing so how do you think about the capex and also your management in the new business or existing business? Thank you.

Yeah, look, on the exchangeable bond, that was done in June, and as you mentioned, will expire in June next year. Time in June, it was favorable market conditions that, you know, when we're looking to do a bond like that, it was an instrument that we looked at, and the pricing is superbly attractive, helps to get the balance sheet. Cathy Pacific riding high but the Middle East crisis gives you that flexibility for what will happen in the next 12 months on that base but again we still own 45% of it and we can refinance it so it's a really strong financial instrument that we've got and we're pleased with it Swag property there's no discussion on doing something like that there's opportunistic financing at the time Harvest period on capital the harvest period on capital Well, I think they're slight freakers themselves in terms of the intent of the continued investment. I mean, the strategy that we have in properties is recycling. We've recycled over $60 billion on that piece. We're not changing strategy in any sense. We're investing heavily across all the core divisions in that piece. We've got seven properties under execution, so we are very much focused on the execution and delivery fees as well. But yeah, it's exciting things.

Thank you. Any next questions? Yes, gentleman in the back.

Hi Guy, hi Martin, hi Karen. Thanks. This is Jeffrey from CLSE. So my question is about the interim dividend 15% YY growth here. So just trying to pick your brain on how or what factors have you considered? Amount one, CAFE's 30% growth in interim dividend, two, maybe perhaps your outlook for the rest of the year for the entire SWA group, and three, have you considered anything about rebalancing the split between interim and final dividend for SWA Pacific? So just trying to figure out When you think about passing through cafes, dividend income to your shareholders, is there any particular time frame in your mind when that will happen? Thank you.

Yeah, look, the cafe is a great 30% story, but again, your percentage is off basis, right? So they're coming out of a low base in terms of their dividend on that fee, so it's great to see them having bigger dividends. From a SWAT Pacific point of view, as we said, strategic investments and progressive dividend on that bit with a strong balance sheet allows us to do that. So I think the outlook remains really strong. I would expect the dividend to continue to be strong in that piece. I think the question that will get asked afterwards is about the share buyback. And I think one of the reasons for the strength of the dividend around here with the share price Thank you. Any other questions? Yes, gentleman in front, in the middle. Just two questions. One on Coca-Cola. I noticed that on the slide showing the margin improvement.

and that I think the ASEAN market margin had already been exceeded China, if I was correct. Maybe I was wrong, but anyhow, would you be able to share with us how you are thinking about the medium-term outlook on the margin trends for China as well as the ASEAN market? That's the first one. The second one, I think a lot of commitments across the group on investments and with, I guess, CAFE and also Swipe Property self-funded And now I think Martin, you also mentioned that the healthcare business is too pricey. Where else could you invest outside of your mentioned dividend and share buyback? Just try to think what else you can invest in.

Thank you for the question. Yes, we do have margin improvement in the first half, and I do see the trend will continue, and this is also the goal for our business as well, to continue to drive margin improvement across all our business through our commercial initiative, portfolio package pricing strategy, and also through cost efficiency exercise to improve our overall organization effectiveness. Thank you.

Yeah, I mean, there's no change in the strategy in terms of the capital commitments we still are executing across all the businesses. The property still has a big pipeline on that front, and we've been clear on the capital expenditure on that piece. There's no change. The health care is always a small part of the portfolio at this point as well. So there's no change in that strategy. The balance sheet is marginally improved on that bit. It's still up at that 19% gearing on that piece. So it just gives us flexibility in terms of what we can do and continue to do progressive dividends and do things. So I think we're in good shape in that point in time. We're not looking for steady new segments, but we are going to see something out of right field that's not in our core businesses. So all the investments are through our core businesses.

Thank you. Any next questions? Yes, gentleman in front in the grey shirt.

Thank you. Feng Chou from Bank of America. I actually have two questions for Karen. I think first of all, congratulations on the mainland performance. I think it's very strong despite the very weak consumer sentiment. So can you give us more color about what strategies you are making in the mainland? Because you mentioned e-commerce, but we all know that e-commerce is nothing new. So if you can tell us more about your strategy in the mainland. And secondly, I think on the cost sensitivity to the margin, especially if oil price is trending down towards the end of this year or even next year, what kind of margin should we expect on the overall beverage side? Thank you.

Thank you. Yes, overall the consumer sentiment in China still remain cautious, yet there are lots of opportunity that we can grow our sparkling business, especially in China. So one of the things that we're seeing consumers shifting their precious behavior from the traditional channel to e-commerce, which is online, and also to the immediate consumption channel, tourism, sports events, and those are the very strong emerging channels. And we're able to also deploy lots of the smart cooler into the channel that we have not been able to capture the consumption in the past. So overall I would have to say the very effective allocation of our resources to invest in the place in the channel where the consumer are actively shifting the consumer behavior that helps us to capture the consumer purchase in China. And overall the beverage category is still growing nicely in China. So on your second question on the cost pressure, we do see moving into the second half, the cost pressure will continue, especially when in the first half we are a little bit insulated by cost due to our advance purchase. But in the second half, we were having more pressure. But having said that, we continue to use our commercial initiative through a better pricing right channel strategy. Thank you. Thank you. Any other questions? Gentleman at the back.

Hi, Karen. I promise this is my last question. Just maybe for the sales volume in China for the first half, can you help us understand maybe perhaps the momentum between first quarter and second quarter? Do we see some deceleration in second quarter in light of what's happening at the rest of the world? Or do we see an accelerating trend as you go through the first six months of 2026? Thank you.

Thank you, Thomas. No, I think for the first quarter and second quarter, our volume both growing at a high single-digit or even double-digit number, which is very nice to see. And this is driven by sparkling growth, which is the core driver of our growth. At the same time, packaged water also delivers huge volume growth for us. Thank you.

Any more questions? looks like everybody's happy. So thank you very much for joining us this afternoon. That concludes our session for today. Thank you.