2024 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, as well as Ms. Karen So, Managing Director of Swire Coca-Cola. Before we take a detailed look at our annual results for the year, we'd like to show you a short video highlighting Swire Pacific's key developments and achievements in the year. Enjoy the video. May we now invite Guy, Martin, and Karen to please take us through the details of the annual results of 2024.
Good evening, and thank you for joining us. In terms of strategic highlights, these are a good set of results in what I would characterize as a very challenging operating environment. We've continued, in spite of that operating environment, we've continued to invest, which demonstrates our confidence in the future. Swire Properties have committed 67% of their HKD 100 billion investment plan. They've continued to invest in the Greater Bay Area. They've increased their stake in the INDIGO projects in Beijing. We also, in 2024, did the successful launch of our first residential project in Shanghai. On the beverage side, we invested in the Thai bottler, the big Thai bottler, Thai Namthip, and increased our stake to just under 56% in that business in Southeast Asia.
Cathay Pacific continued to repay its government debt and, more to the point, committed a further HKD 100 billion over the next seven years in re-fleeting to capture the Third Runway System's growth. Lots of good examples of confident investment, which should set us up over the next 7-10 years. In terms of numbers, the recurring underlying profit at HKD 9.3 billion shows here was down 11% versus the prior year. The prior year contains the impact of the U.S. bottler that we sold in 2023. If you took that out, you'd actually get a small gain in recurring underlying profit in 2024, which I think supports the strength of these results here. On the back of that, we were confident enough to increase our dividend by 5%. In terms of the specific business performance, I've described the recurring underlying profit as strong.
I think we continue to focus on delivering value for our shareholders through a progressive dividend policy and through the buyback program that you know about. On the property side, business-wise, 2024 was characterized by continued lower office rental income in Hong Kong. I think we can say that retail sales started to normalize in both the Chinese Mainland and Hong Kong towards the end of 2024. As I said earlier, we're very pleased to launch our first residential project in the Chinese Mainland in Shanghai. In beverages, the overall profit decreased, driven by that disposal of the U.S. bottling business, but was partly offset by profit contributions from the newly acquired franchise in Thailand and Laos. The exciting news, again, in beverages was that recurring profit from the Chinese Mainland went up by 11%, largely driven by price increases in that market.
On the aviation front, the strong results were driven both by ongoing robust demand for passenger travel and strong cargo performance, and the HAECO Group achieved a 45% growth in recurring profit on the back of the upswing in the aviation sector. At this point, I will turn over to Martin to talk about the numbers in much more detail and how we're doing on the sustainability front.
Thanks, Guy. Again, a summary of the big picture numbers you'll see is, Guy mentioned, all our profit, revenue, cash-generated numbers have been significantly impacted by the sale of the Swire Coca-Cola U.S. business back in 2023. I've put the numbers underneath so you can see the extent of that. The difference in the statutory profit and the underlying profit is caused by the change in fair values in the investment property, which is about HKD 6 billion. Really, what we look at is the recurring underlying profit, which, again, was marginally up on that basis. I think despite the disposal of Swire Coca-Cola U.S. and the lower recurring underlying profit overall, we continue with our progressive dividend policy. You can see here the adjustment on the second line, which is the adjustment in relation to the investment property.
Then just going down, we've got much smaller non-recurring items. You'll see in the 2023 there, you have the HKD 3.5 billion sale of One Island East, and then the big number being the sale of the U.S. business that allowed us to pay a special dividend in 2023. In 2024, the non-recurring items are much smaller, so a smaller stake of the remaining car parks in Taikoo Shing, the deemed disposal of shares in China, the remeasurement gain, a small remeasurement gain in the second phase of the Thailand, and then the gain on Cadeler shares that we're holding, but much smaller under non-recurring items. Whilst this is the step change here, it really just shows the messages of the strength of the solid recurring profit in a difficult market.
On the property side, as Fanny just mentioned at the properties analyst briefing, lower office rentals in Hong Kong and higher net finance charges are the main reason for that decline. Beverages is all the decline is all to do with the loss of business in Swire Coca-Cola U.S.. Obviously, we have contribution from Thailand and Laos, but we had a strong increase in profitability from the Chinese Mainland, which was very pleasing. The story of the thing is, again, the continued strong performance from the aviation division, particularly in Cathay Pacific, with good yields and good cargo performance in 2024. This, again, just shows the recurring and non-recurring items that I have discussed, but per the division basis. Our net debt of HKD 70 billion has a healthy gearing ratio of 22.1%, 23.7% if you include the lease liabilities. Our weighted average cost of debt remains healthy at 4%.
Our fixed rate basis is 64% of our fixed of our gross borrowings are fixed. We have a very strong over HKD 43 billion of available liquidity and a very healthy maturity profile. We are very proud of our sustainability credentials. We should be, in terms of Swire Properties, beverages, and aviation market leaders, which we are, and we are very proud with how well we are progressing to our 2030 commitments across the board under our five pillars of SwireTHRIVE. We are also very proud, particularly with Swire Properties, as Fanny recently mentioned, becoming number one in the Dow Jones Sustainability World Index for real estate management and development industry. I think the video showed our commitment to CSR and how proud we are for the developments we are doing across all three of our core provisions.
Thank you, Martin. Moving on to the business review, I'll take properties first. In 2024, we continued to invest. We got the OP certificate for Six Pacific Place in February, and that's pre-leasing very well. Despite the difficult time in Hong Kong for demand and supply, both Six and Five Pacific Place are achieving very, very good leasing levels. We continue to invest in the Greater Bay Area through a 50% joint venture, which we've now called Taikoo Li Julong Wan in Guangzhou. In Guangzhou, after several years of trying, we managed to acquire the GIC building next to Taikoo Hui in Guangzhou, which will be a useful addition to the Taikoo Hui shopping mall there, and that's being renovated right now. We also increased our investment in what we now call Taikoo Place Beijing, which was formerly INDIGO Beijing, by 15% last summer in August.
At the end of the year, we did our first launch in residential in Shanghai, Lujiazui Taikoo Yuan, and the pre-sales of the first batch were extremely successful. We sold 49 out of 50 units on a pre-sale basis. As you heard Tim say in the previous session, Swire Properties is now number one in the Dow Jones Sustainability World Index, and that is an incredible achievement to get down the sustainable front. In terms of the overview of the business, the decrease here on the left in underlying profit primarily represents lower disposals in 2024 versus prior year. Prior year, the figure there contains the sale of nine floors in One Island East and many more car parks in Taikoo Shing, and that explains the 42% drop. We have talked about the recurring underlying profit being much lower than that.
The movement there on the right-hand side basically reflects that comment, i.e., HKD 4 billion of the drop came from the lack of equivalent divestments in 2024. This chart shows the 67% commitment that I mentioned at the start of the HKD 100 billion investment plan. The only comment I'd really like to highlight here is that it's a reasonably balanced spread of capital allocation here, albeit the allocation to the Chinese Mainland is nearly complete at HKD 46 billion out of the HKD 50 billion. We have also been investing capital in Hong Kong and in Southeast Asia, so it's across all our core geographies. In terms of the pipeline, 2025 in the Chinese Mainland looks empty there. It's not empty. There are 10 projects being constructed at this point in time, and they're all very large and lumpy. There's a lot of work.
We've never built so much at one stage as we're building right now. Some of those projects will come through, as you can see in the list there for 2026 in terms of opening, the balance, 2027, and a couple beyond that. In Hong Kong and the Southeast Asia markets, you can see there those are primarily residential projects in keeping with our capital allocation strategy, which is to also try to increase the proportion of residential projects that we use for our capital. The Hong Kong portfolio performance, the office occupancy did remain steady at 93%, which is a very good defensive position at a time when demand is weak and supply is quite strong.
I think this position reflects what we like to call the flight to quality, where in times like this, tenants look for the higher quality buildings in the higher quality locations, and both Pacific Place and Taikoo Place represent just that. Retail side, it remained resilient. You could see all our shopping malls in Hong Kong 100% leased, which is a good achievement given the relatively soft retail environment. I think that also is testament to this flight to quality that people want to be in Pacific Place. They want to be in Citygate Outlets, and they want to be in Cityplaza. On the Chinese Mainland, it's becoming an increasingly strong growth engine for Swire Properties.
You can see in the chart here on the right that the contribution that the Chinese Mainland retail is making now is almost on a par with the formerly biggest contributor, which was our Hong Kong office portfolio. They are both almost even now in terms of contribution, which shows the growth that you can see on the left in terms of our Chinese Mainland retail portfolio. I will move over to beverages and ask Karen to take over, please.
Thank you, Guy. Moving on to Swire Coca-Cola, revenue and profit increased in both Chinese Mainland and Taiwan market, particularly for the Chinese Mainland. Revenue increased by 3% in local currency term through our effort in effective revenue management and market execution. Swire Coca-Cola continues to make significant capital investment in the Chinese Mainland to strengthen our production capabilities and support our sustainability scope. We broke ground on the Greater Bay Area Intelligent Green Factory in Guangdong in May last year. The factory is designed to be environmentally friendly and incorporating advanced technologies to reduce carbon emissions and improve the energy efficiency. The construction of the new plant in Henan, Zhengzhou, and Shanghai are on track to start operation this year. In Southeast Asia, last year, we acquired equity interests in Thai Namthip, which is the Thailand bottler, with franchise business in Thailand and Laos.
The acquisition was completed in two different phases in February and September last year. At the end of last year, Swire Coca-Cola held a slightly below 56% equity interest in Thai Namthip. This acquisition has expanded our footprint in Southeast Asia and provided us great growth opportunity in this market. You may notice there is a non-recurring gain of HKD 651 million was recognized from the remeasurement of our business equity interest to fair value in Thailand and Laos business as they become our subsidiaries, as well as also an exchange rate gain from the appreciation of the Thai baht against the Hong Kong dollar. In Vietnam and Cambodia, we continue to strengthen our operation by focusing on route to market and execution capabilities. Looking at the EBITDA performance overview, Swire Coca-Cola recorded an EBITDA of HKD 4.8 billion in 2024.
The drop compared to last year was largely due to the disposal of our Swire Coca-Cola USA business in 2023. Look at Chinese Mainland, EBITDA increased by 8%, mainly contributed by increasing the revenue through our effort in revenue management and also market execution and with lower raw material cost. In Taiwan, EBITDA also increased very nicely by 17%. In Vietnam and Cambodia, EBITDA decreased by 7%. The result was mainly affected by the unfavorable exchange rate movement of the Vietnamese dong against Hong Kong dollar, which depreciated by 4.9% over that period. Also, as we are relocating our plant from Ho Chi Minh City to Long An, there's a higher relocation cost expense, which is recorded in our P&L in last year. In Thailand and Laos, the EBITDA was HKD 422 million. The underlying business continued to grow, but we are also adversely impacted by the sugar tax legislation.
The recurrent profit increased by 20% year on year when we excluded the contribution from our U.S. business, which is at the same time the increase is mainly contributed by the result of Thailand and Laos and also the increase in Chinese Mainland. On the category, sparkling remains the largest driver among our portfolio at 70%. Juice comes next at 14%. Swire Coca-Cola continues to commit to grow our sparkling business while also offering a future-oriented portfolio of market-leading brands in other categories. Revenue contribution was mainly from Chinese Mainland. If we look at the finance data down below, again, the substantial decrease is due to the disposal of our U.S. business. As mentioned earlier, recurrent profit increased by 20% if excluding those contributions, and our EBITDA remains at 12.5%. EBITDA margin remains stable at 12.5% with the impact of the disposal of SCC, our U.S. business.
At the same time, they are being offset by the newly acquired business in Thailand and Laos. Looking at the revenue by region, our revenue in Chinese Mainland and Taiwan increased. Hong Kong basically remained flat. Vietnam, Cambodia decreased mainly due to the exchange rate. From EBITDA margin, EBITDA margin in Chinese Mainland has improved by 0.5 percentage points, which is driven by revenue growth. At the same time, Taiwan has also improved nicely to 12.6%. You may also notice that the EBITDA margin from our newly acquired business in Thailand and Laos has a very positive impact in our overall EBITDA margin performance of Swire Coca-Cola. With that, I will pass it back to Guy for aviation business.
Thanks, Karen. I'll go fairly quickly through aviation, as you'll have heard it in more detail yesterday. On the left here, you could see on the airline side, there's continuing robust demand for travel, passenger travel and cargo, which translated on the right-hand side for HAECO as a knock-on effect in a healthy increase in attributable profit from HKD 45 million in 2023 to HKD 399 million last year. This represents for Cathay the second consecutive profitable year earning at a 100% basis, HKD 9.9 billion in 2024 versus HKD 9.8 billion in 2023. Two extremely strong recovery years post-pandemic with liquidity on the right-hand side and gearing getting back to more like historical levels. We talked about the new fleet investment program. Cathay reflecting its confidence in Hong Kong as an international aviation hub.
The Third Runway System has announced over the next seven years a program to commit HKD 100 billion into mostly new aircraft types. Also, the financial paying back of the government debt is now all done, basically. The restructuring that happened during the COVID pandemic has been put to bed. In terms of an outlook, regional yields have normalized and continue to do so. Long-haul supply, we think, will increase in 2025, which again will put pressure on yields, and we expect those to continue to normalize further for the rest of the year. I would note that supply chain challenges continue to affect the entire global aviation industry, and Cathay Pacific is part of that. There will still continue to be supply chain challenges in terms of the ordering of equipment.
On the cargo side, as you're all aware, we're very closely monitoring the impacts on air cargo demand from the increase in tariff and the uncertainty around the exemptions coming out of the U.S., and we'll adjust the network and cargo mix accordingly when that situation becomes a bit clearer. Just turning to HAECO, the recurring profit increase was driven by the ongoing recovery of line maintenance activity, which follows the uptick in Cathay's growth. It was also contributed by good demand for engine overhaul at both HAESL and HAECO Engine Services in Xiamen, our two engine shops, and an increase in base maintenance man-hours sold. Lastly, healthcare. You can see here that there was continued growth in 2024 in revenue. We've put a focus strategically on two businesses at the moment.
One is the Delta Health Hospital that specializes in cardiovascular care in Shanghai, where we completed the acquisition in April 2024. We now control that asset and are in the process of turning that around. That's a high priority for the management team. We also completed the first tranche of an investment in an Indonesian healthcare opportunity in conjunction with a sovereign wealth fund, INA, in July last year. That's an exciting turnaround of up to 70 hospitals across that country. I would say it's very early days in our healthcare journey for Swire. We've announced a capital commitment program of HKD 20 billion over 10 years. We've so far invested less than HKD 3 billion. We're being fairly slow and cautious on this as we understand the sector better.
I would say that policy direction in the Chinese Mainland for private investments in healthcare is starting to seem positive, and that augurs well for future deals. Lastly, in terms of outlook, I think we expect market headwinds to continue in 2025. We're going to continue our focus on execution of these recent investments that we've made across our core markets, and we'll continue to look for opportunities to expand our business with an emphasis on the Greater Bay Area. I think in property, the office market in Hong Kong, as you heard the Properties team say earlier, we expect to remain subdued. Retail sales will probably continue to face challenges, as you're seeing a lot of spend taking place over the border at the moment and cautionary spend down in Hong Kong.
I think in mainland China, the retail sales growth is expected to gain and pick up in momentum in 2025, and that's a good sign. On the beverages side, again, we think that the revenue growth will continue to rise in the Chinese Mainland, and that's our biggest market. That augurs as well again for 2025 in terms of what changes we need to make there. On aviation, I talked about yields continuing to normalize, and I think you've also got the question about cargo and tariffs, and that is a question at this stage. We are watching that situation very carefully. For HAECO lastly, we expect a stable demand for base maintenance, continuing growth on line maintenance work, and strong demand as we had in 2024 for the engine overhaul services. I'll leave the outlook there, and perhaps we can move into Q&A. Thank you.
Absolutely. Thank you, Guy, Martin, and Karen. Let's move on to Q&A. We'll take questions from the floor. Please advise your name, organization, and provide your questions in English with two at a time at most. Please await my cue, and our staff will pass you a microphone. Yes, gentlemen in the front, Karen and Guy.
Hi, thank you, Guy, Martin, and Karen. This is Fan Tso from Bank of America. Two questions from me. First of all, on your thoughts on renewing the buyback program and in particular, any pressure from the credit rating metrics front that will prevent you from using more free cash flow into a share buyback and what is your early thoughts on whether to renew it or not. Second one on the mainland China beverages. I saw a very impressive ASP growth, particularly last year. I think the overall mainland China environment is pretty deflationary. Can you elaborate more about what have you guys done to maintain that ASP growth and whether it is sustainable into this new year? Thank you.
Sure. Yeah, thanks for the question. What we've tried to do in the last few years is give a clear indication of our strategy and outlook. The beauty of being a conglomerate is that you can ride economic uncertainties. We've been very clear that we've got a HKD 100 billion investment portfolio in property. Similarly, rolling out new franchises in Southeast Asia with the beverage business, HKD 20 billion we can spend in healthcare and even Cathay Pacific. I know it's an associate, but I've got a HKD 100 billion spend on the capital bit. Our commitment to spend is there. We've always said that with the strength of our balance sheet, whether it be Swire Properties or Swire Pacific, the gearing is still very low, and it gives us a lot of tools to continue.
The share buyback program itself is relatively small, and we have a progressive dividend policy. The beauty of being the strength of that balance sheet and being able to do long-term investment decisions and recycle assets is that there's no change in that strategy. The beauty of the share buyback program is that the reason why you have a program is that you can put it under the drawer and not think about it. A lot's happening in the world at this point in time, it will be a decision to be made in May. We have certainly enjoyed the benefit of the buyback program over the last couple of years. As I said, it's all part of our shareholder return portfolio.
Okay. The revenue growth in the Chinese Mainland is mainly contributed by a few important strategies that we have implemented in China. First of all, we're pushing for price rises. There are price rises opportunities, and we're pushing for this, leveraging the power of our brand. We do have a collective powerful brand on our hand that can give us that power on price rises. Then package differentiation by channel. The better we can differentiate by pack, by channel, the better we can demand a premium pricing. Also, driving more single-serve consumption on the go, which is a more premium package for us. At the same time, we are very strong in execution in the market, which allows us to command a premium pricing in the market. Looking at the outlook for our strategy, we're going to continue the strategy moving forward.
We are optimistic that it will bear fruit to our overall revenue growth this year.
Thank you. Any other questions? Gentlemen on the left-hand side in front.
Thank you. This is Raymond Liu from HSBC. I got two questions, which is more related to beverage business. We actually see very nice improvement in the China business here. Can management share with us what would be the outlook on the EBITDA trend? Should we see more improvement in the next 12 months' time for the beverage business? The second question is also related to the Southeast Asia expansion because we have a strategy pivot from U.S. side to satellite and then towards Southeast Asia. It seems that there are still some opportunities here. Should we expect there will be more expansion to come for your expansion towards Southeast Asia? Thank you.
Okay. Thank you, Raymond. For the EBITDA performance in Chinese Mainland, we're expecting future EBITDA will be steadily growing in Chinese Mainland. As I mentioned earlier, we're going to continue our strategy in revenue growth and premiumization of our brand. We are also at the same time streamlining our operating efficiency. We believe those efforts will continue to contribute to our overall EBITDA growth in Chinese Mainland. For Southeast Asia, we are very excited that we have the opportunity to expand our business in Southeast Asia, and those are very, very good markets for us. We continue to look for opportunity of expansion in Southeast market whenever the valuation is right and it has a complementary value to overall of our business.
Thank you. Any other questions? Yes, gentleman in front.
Hi, thank you. This is Praveen Choudhary from Morgan Stanley. Two questions for me. The first one is for Martin on gearing. You said 22% is very comfortable. Swire Properties mentioned that to maintain certain credit rating, they want to keep it below 20%. Just wanted to understand what is the comfortable level for Swire Pacific. The second question is for Guy. This is about the corporate structure. I'm not sure you can answer it here, but there are two ways to do this. One, you privatize Swire Pacific to remove the double discounting. Some people have done that. Wheelock, for example. Or you split every company separately, like what GE has done, and their stock has gone 3x. Just wanted to get your thoughts on how does board and management think about it. Thank you so much.
Yeah, on the gearing side, when we launched our talk of the HKD 100 billion spend and how we could do that and all the capital allocation we did, I did mention that I'd be very comfortable with gearing at 30%. Fanny mentioned for Swire Properties 20%, and both Swire Properties and Swire Pacific think they'll be well under that level. From that point of view, I think that answers your first question.
I think on the second question, all I could say is that both the major shareholder and the current management don't feel this is the right time to go down those sort of routes, and we feel the structure at the moment is the right structure for the group.
Thank you. Yes, gentlemen in the front.
Thank you. This is John Lam from UBS. I have two questions here. The first one is regarding the bond refinancing. This year, I think on the PowerPoint, we have about HKD 10 billion for the bonds to be mature. Just wonder about we see that Swire Properties have been able to tap into the onshore or the RMB loan market, which has a low interest rate. Not sure if we could also do the same as well. The second one is about, is there any further opportunity for the capital recycling? Thank you.
Yeah, I mean, Swire Properties has done a great job in terms of the dim sum bonds and the green financing. Obviously, they've got their projects going on in the mainland, and obviously, you're trying to balance the currencies. So they have the need for Renminbi , and they take advantage of that quite well. We share a similar weighted average cost of debt, about 4%. So again, we manage that in a healthy situation on that front. We've got a lot of liquidity. Yes, we like the bond market as well as the equity market. The bond market, on that front, we will tap into it, but we're in no rush. We've got a healthy balance sheet. The interest rate continues to come down a little bit.
We tap the private placement market, which is, again, significantly or has been a lot cheaper than the bond market. Again, we chip away at having long-term debt through private placement, etc. It is just timing. The capital recycling, again, we continue to as part of the portfolio. We are very open with the capital commitments that we have made in terms of the targets. Again, we recycle assets and it is part of that portfolio.
Thank you. Any other questions from the floor? Right. That might be it. Let's call it a day. Thank you so much for attending.