Cathay suffers 63% drop in second-half profits

CATHAY PACIFIC Airways was the biggest decliner in Hong Kong’s Hang Seng Index after predicting a “challenging” year and suffering a 63 per cent drop in second-half profit.

Economic uncertainties will probably dent passenger and freight sales in 2012, while fuel prices are continuing to rise, the Hong Kong-based carrier said.

Net income at Asia’s biggest international airline dropped to HK$2.7 billion (€267 million) in the six months ended in December from HK$7.2 billion a year earlier, according to calculations based on annual results.

Cathay Pacific’s freight volumes fell 8.6 per cent last year, and it filled a smaller percentage of seats, as the economic slowdown sapped demand in Europe and the US for Asian-made goods.

Singapore Airlines also had a drop in profit in 2011 because of the slowdown and a 40 per cent jump in fuel prices.

“This year doesn’t look really rosy,” said Tim Bacchus, an analyst with CCB International Securities. “The first half is not going to be good for cargo, but I am counting on some kind of rebound in the second half.”

Cathay fell 2.8 per cent, reversing earlier gains, to HK$15.14 at close of trading in Hong Kong. The benchmark Hang Seng Index dropped 0.2 per cent.

The carrier cut its year-end dividend to 34 Hong Kong cents from 78 cents a year earlier. Full-year net income fell 61 per cent to HK$5.5 billion, missing the HK$5.8 billion average of nine analyst estimates compiled by Bloomberg.

Excluding year-earlier one-time gains, the decline in annual profit was 50 per cent, Cathay said. Sales for the year rose 9.9 per cent to HK$98.4 billion.

“Last year’s economic uncertainties have continued into the first half of this year,” said chairman Christopher Pratt. “2012 looks set to be even more challenging than 2011.” The company booked fuel-hedging gains of HK$2.25 billion last year, compared with HK$959 million a year earlier. That includes unrealised gains.

Disregarding hedging, fuel costs increased 44 per cent because of higher prices and increased flying, the carrier said.

The airline filled 67.2 per cent of cargo space last year, a decline of 8.5 percentage points. – (Bloomberg)