Ladies and gentlemen, welcome to the conference call of Hutchison Port Holdings Trust interim results announcement for the period ended June 30, 2026. Now, I will hand over to Ivor Chow , the CEO of Hutchison Port Holdings Trust. Mr. Chow, please begin.
Thank you. Good afternoon, everybody. Thank you for joining our half-year results call. As usual, I will first give a review of how I saw the first half, how we did, as well as give some of my thoughts as to what is the likely outcome for the second half as well. Then I will pass on to our CFO, Ivy Tong, to go through the numbers review, and then we will end it with the Q&A.
Overall first half, I think for the trust wise, I think we did pretty well considering all things, given how volatile the world has been, as well as the Ukraine conflict, the Israeli conflict, as well as the Iranian conflict. We have actually done quite well year-on-year, as well as kind of meeting our own internal budget as well. Overall, our volume was up against last year, overall about 5%.
Obviously, the outperformer has been, for over the last couple of years, Yantian, and Yantian continued to do quite well in the first half. Hong Kong is still collectively on the first year below last year, 5%. But if you look at how we did first quarter, we were actually down closer to 10%. We actually had a positive quarter for Hong Kong, and the first time that we have seen actually growth from Hong Kong over the last three, four years. Hong Kong seems to starting to show sign of stabilizing. Overall, if you look at from a volume standpoint, from a margin standpoint, and from a profitability standpoint, and because we have been able to manage our interest costs fairly well. We did have a decent amount of profit growth.
We will be distributing half year interim dividend of HKD 0.05 per unit, which is the same as what we did during last year in 2025 as well. If you look through some of the volume growth, in the first half, you would see that for Yantian in particular, U.S. and Europe trade continues to do quite well. In particular, the U.S. trade in the second quarter. Because U.S. trade was actually down first quarter due to the tariff impact. But I think after President Trump and Chairman Xi met in Beijing, the market felt that there was a kind of resemblance to normalization between the U.S.-China relationship, and therefore, a lot of shippers were rushing to export their U.S. cargo in particularly April and May, and a little bit of June as well.
You would have seen that the U.S. freight rates have actually increased quite a bit during that period of time. I would look at that as more for front-loading and obviously because last year, if some of you remember, the tariff war actually started in the second quarter. We actually had an unusually low base last year, and hence the strong quarter that we have seen in the U.S. is just due to a lower base last year as well. We are monitoring the situation, whether it would continue into the third quarter. I think third quarter, we are still looking okay for the time being. A lot would depend on the further meetings that is planned between Chairman Xi and President Trump, in the U.S. visit as well as the APEC visit as well in Shenzhen.
There is certainly a little bit of front-loading involved, and whether that will continue into the fourth quarter will actually depend a lot of the consumption demand. Obviously, with fuel prices being quite high, inflation is obviously quite high in the U.S. as well as other places. That may impact consumer sentiment coming into the second half as well. Obviously, with the Fed now looking potentially to increase rates rather than decrease rates as originally anticipated. Interest rate will play a factor, but not only in the consumption, but also in the fact that we would have about $500 million of refinancing to be done. Likely to be a bond, depending on market conditions. We are looking at quite a step up in interest costs from the refinancing. We do expect pressure on interest costs in the second half as well.
We are continuing our plan to pay down debt, continue paying down the HKD 1 billion that we have committed to every year, and we will do so this year as well. Hopefully, that will offset some of the interest cost increase due to underlying rate increase as well. Overall, while the Iranian war has affected fuel prices, which obviously impacted our costs as well, the volume has grown, and we are less affected by the Middle East trade comparatively. With Hong Kong transshipment picking up a little bit, with Yantian export picking up a bit, we are still doing relatively well. Looking into the second half, as I said, a lot of uncertainty with relate to some of the conflicts we are seeing. Even the Red Sea is now looking to flare up again, and that may have some impact.
Due to the regional conflicts around the world, we are seeing a lot of congestions around ports around the world. In Singapore, in Shanghai, and Ningbo due to weather. With ships coming online from the shipping lines as well, a lot of new ships coming on, there is a need for a buffer port, if you will, to manage some of the port congestion we have seen around the world. Hong Kong, being a bit underutilized, potentially can pick up some of that transshipment volume as well, which we are working very hard on. Hong Kong is embarking on its five-year plan, as part of the 15th five-year plan of China. We are lobbying very hard with the government to see whether policies can be provided to support the port of Hong Kong as well.
We are working all fronts to try to get Hong Kong back into shape. But with the uncertainty over consumer demand and the overall supply chain situation, we are cautious in terms of the second half outlook. With that, I pass on to Ivy to give us a bit of a run through the numbers, and then we will go into the Q&A.
If I jump onto slide nine, looking at our throughput volume. For the trust at the first half of 2026, we have throughput of around HKD 11.7 million, a 5% year-on-year increase. In terms of YICT and HICT, there is a 10% growth, so throughput ended up at around HKD 8.5 million. For HPHT, Kwai Tsing, we had a 5% year-on-year drop, so that throughput was around HKD 3.3 million. If we look at the revenue and other income, on the left-hand side of the bar chart, you will see that we had a 10% year-on-year growth, so that total revenue and other income reached around HKD 6.2 billion. Mainly this is due to higher throughput, as well as higher storage income. For this half, we also benefited from the RMB appreciation.
If you then look onto the right-hand side in terms of the segment information, what you see is that in the first half of 2026, 83% of our revenue came from operations in Chinese mainland, with the remaining 17% from Hong Kong. The increase in proportion for Chinese mainland when compared to the first half of 2025 is largely due to the RMB appreciation impact. If we then jump to the total CapEx, you will notice that for the first half of June 2026, total CapEx was around HKD 277 million, 28% increase year-on-year. This is largely due to the increase in CapEx for Yantian as they progress with its QC heightening program and also with the purchase of new QC to just accommodate the increase in deployment of larger container vessels.
Moving on then is to take a look at our total debt and net debt position. What you see in the first half is that there is a drop in short-term debt, which is offset by an increase in our long-term debt. This is mainly just due to the refinancing for the redemption of the March $500 million bond with a new five-year bank loan facility that was done at March. So that total consolidated debt at the end of June was around HKD 24.2 billion. Included, reflected in here is that from our announced plan of our HKD 1 billion repayment, we have already undertaken HKD 200 million repayment in the first half of this year, with the remaining HKD 800 million expected to take place in the second half of this year.
In terms of net attributable debt, it is around HKD 17.2 billion, which is a 4% reduction when compared to the year-end position at the end of December 2025. As Ivor mentioned, we are currently assessing the refinancing option for the $500 million guarantee notes that is due to expire in September, with most likely market conditions permitting with a new bond issuance. Finally, I just want to go through quickly the half year results, which is on slide 15. As mentioned before, total revenue was 10% better year-on-year at HKD 6.2 billion. Our total operating expenses recorded a drop of 3% to around HKD 3.4 billion. Included in there is a disposal gain that we have realized in the first half of 2026 of HKD 164 million, which is in relation to the land expropriation at Yantian.
Operating profit is around HKD 2.8 billion, 30% better. As we mentioned, we had a 10% saving in interest cost, so our interest expenses was around HKD 382 million, largely because average HIBOR for the first half is lower than the same period last year. We also benefited from last year's HKD 1 billion loan repayment. Profit after tax was HKD 1.5 billion, 47% better, with profit after tax attributable to unit holders at HKD 491 million, 85% better year- on- year. So that is the update for the financial positions and results of HPH Trust.
Then we can start the Q&A.
We will now begin the questions and answer sessions. Participants with questions to pose, please press star one on your telephone keypad, and you will be placed in a queue. To cancel the queue, please press star two. Mr. Deepak Maurya from HSBC, please go ahead with your questions.
Go ahead. Can you hear us, Deepak?
Hello.
Hi.
May I go ahead?
Go ahead.
Yeah. Okay, great. My first question is about the debt exposure. You mentioned that, and even in the previous call during the full year, you mentioned that it is more aligned to the HIBOR now. Could you help us understand what proportion of your debt is currently based or priced upon HIBOR?
Currently, 37% of our debt are under fixed rate, the remainder are all HIBOR-based borrowings at the trust level.
Okay. The sensitivity would be more towards the HIBOR now, rather than the Fed policy rate. Is that a fair assumption?
Yes.
Okay. When you look at the throughput trends, right, yes, second quarter was an outstanding quarter, but from a very low base. However, even in the second half of last year, we had low single-digit growth in Yantian. In that context, is it fair to assume that growth may slow down in the second half from the first half of 10%, but it might still be in low to mid single digits? Is that a reasonable outlook?
I think that would be a fairly reasonable outlook given what we are seeing. Obviously, the key thing is, as you know, last year, the USTR 301, in terms of U.S. leveraging port fees to Chinese-made ships. President Trump deferred that for one year. But it is due for another extension sometime this year. Whether that will happen or not may have an impact on what the actual volume growth will be. Again, like I said, if U.S.-China relationship normalizes in the second half, then what you have laid out is definitely more possible.
Okay. With respect to the confidence of your customers, we've seen quite a number of shipping carriers come out and upgrade their guidance for the full year. Of course, it is driven by a very strong rate environment. Do you think that guidance upgrade also translates to a better throughput outlook for port operators such as yourself?
Well, shipping lines are more dependent on freight rates. Freight rates are high mostly because of the conflicts that we have seen with Hormuz, now with Red Sea and the Cape of Good Hope. So that's more to do with capacity utilization of shipping lines. Whether that actually can translate to actually more goods going through the pipeline, we are actually more directly correlated with supply and demand on consumption, rather than the supply chain smoothness, if I can use that word.
So not directly correlated, but like during COVID, right? If the world is congested, and port congestion does happen, even though the throughput may slow down, sometimes we do pick up more on storage income that can offset some of that lost throughput as well. So it's tough to see. For us, I think, if we have every year, 3%-5% throughput growth, I think that's usually the outlook for the global throughput container growth, if you will.
Okay. When we sketch specifically for Hong Kong, your peer group, the COSCO Shipping Port Company, right? They are also joint venture partners with you and COSCO-HIT and ACT. Over there, when I look at their disclosures, the throughput for Hong Kong for those two particular terminals put together has gone up by about 3% in the first half. However, when I look at your reporting for Hong Kong terminals put together, including the HIT terminals, then it is a decline of 5%. Could you help us reconcile? Does this mean that HIT saw steeper decline versus growth for the joint venture terminals? How should we think about this? You also mentioned that there's some normalization. Help us understand better how this plays out.
Okay. Hong Kong operate under the Seaport Alliance, meaning that the COSCO-HIT, ACT , HIT, as well as MTL, are all run under shared utilization, if you will. So we do not actually particularly look at one terminal throughput over another. It's like the airport. If you have gates 1- 80 in Hong Kong, whether 1- 10 you utilize more and 60 and 70 is less, really depends on our cost structure.
Sometimes it is, and because Terminal 8, where COSCO and ACT resides, are the newer terminal, so their cost basis tends to be a bit more efficient, so we tend to actually put more volume, the bigger ships there. Whereas some of the barges, some of the smaller ships are handled at the older facilities. So from that point of view, I wouldn't read too much into the relative volume. I would look at Hong Kong as a whole to look at the throughput.
Okay. When you look at Hong Kong as a whole, do you see any improvement happening or is it that we're still seeing declines? I mean, we are still seeing a 5% decline this year in the first half. When should we expect this to stabilize?
As I was saying, first quarter, Hong Kong was down - 10%. If you look at the published throughput figures in the Hong Kong Marine Department. We have actually reduced that decline from - 10% to - 5%. That means the second quarter was actually a positive quarter. As I said, we haven't seen that for over the last couple of years. Does it mean that Hong Kong will now go back to a steady increase over the year? It remains to be seen. I think, with what I said earlier about the port congestions that we're seeing around the region, there are signs that shipping lines are looking for at least kind of like a contingent, a port and a buffer.
Hong Kong can provide that because of the location and our efficiency, and we are seeing some transshipment starting to flow back into Hong Kong. I think we'll want to see a couple of more quarters to see whether that is indeed the case. Also, as I said earlier, the Hong Kong government and Beijing is quite focused on trying to help Hong Kong to stand on its own feet. They're having, over the last couple of years, seen volume decline.
We are potentially looking to see some policy support for the port of Hong Kong. With potentially some of the transshipment coming back with more policy support, then at least on the medium long term, Hong Kong can kind of recover some of the lost volume as well. That's something that I'm looking out for. We haven't seen it steadily yet, but I think by the end of the year, we'll see a better sign whether Hong Kong is recovering or not.
Okay. For Ivy, a question on the housekeeping part. The announcement mentions that the other operating income increased significantly because of a disposal gain of some land expropriation. Could you help us quantify how much of this was?
The gain is HKD 164 million.
Okay.
Yes. Disposal gain.
This is something like a non-recurring item, I would say, right? It is a one-off gain.
Correct.
Yeah.
We actually had an announcement on that very appropriation, I think, a couple of months ago.
Yeah.
Okay. Thank you. Perhaps I missed it. Last question on Yantian East expansion. Any updates which you would like to share at this stage?
Our first berth of the East Port expansion is still on track to roll out first quarter in 2027. That will provide much needed capacity for Yantian as well, because Yantian this year potentially could, again, record a record high throughput as well. Additional capacity will help us grow over the next coming years.
Thank you. Yeah, that's it from me. I'll jump back in the queue. Have a great evening, guys.
Thank you. Thank you.
For the next questions, Herbert Lu from Goldman Sachs, please go ahead.
Hi, Herbert. Go ahead. Hi, Herbert. You can go ahead. You can hear us?
Can you hear me now? Sorry.
Yeah. Can hear you now.
Yeah.
Go ahead.
Yeah. Thanks, Ivor and Ivy, for hosting this briefing. First, congratulations on the improvement in the results. I have three questions. First question is for the peak season. As you know, the peak season this year started earlier from May, especially for U.S. restocking. People may have concern that the peak season may go to an end earlier as well. U.S. and U.S. retailers forecast a significant container import decline from August. Have you observed a similar trend? That is for the first question. The second question is for the port congestion. You mentioned there will be many new ship delivery, which may make the port congestion worse. Before that, what caused the port congestion? Due to the extreme weather or any other reason? Can we charge a higher storage income from the port congestion? The third question is on your DPU guidance. Thank you.
Thank you, Herbert. On the first one, on the peak season, yes, traditionally, peak season starts from around July all the way to September to early October. Obviously, if you ask me, the peak season has been less of a case over the last couple of years, especially with the supply chain being very compressed and volatile as it is. With the tariff war starting last year, the peak season largely disappeared because people are starting to front load, back load, depending on what the China-U.S. relationship and the tariffs are situation is. This year, the peak season obviously started early. The restocking started in April and May, largely because, as I said earlier, after the meeting between Chairman Xi and President Trump, people were rushing to get the goods out in case of any deteriorating situation unforeseen.
I do believe that there is a concern in the market and some shipping lines more so than others, that things will slow down a bit quicker in the third quarter than typically do. But we're still looking at a decent June so far, and I think we're looking still solid in July, but I think it'll start tailing off, taping off in August as well. How far it would continue into the fourth quarter would actually depend on consumption, like the Fed rates and as well as inflation and the fuel costs. All these are kind of playing into how I foresee the second half is. I think we're still reasonably okay for third quarter, but fourth quarter, it can be a bit choppy, if all those things don't turn out to be positive. So that's on the peak season.
On the port congestion side, obviously, a lot of them is due to the Iranian conflict. When the Middle East is shut down, a lot of the containers couldn't get into Jebel Ali and the Middle East, and a lot of them has to kind of divert back to Singapore to the surrounding region. Singapore right now is fairly congested, with sometime ships having to wait one or two or even three, four days. It's going to affect and then blowing back. The weather is obviously affecting more of the Shanghai, Ningbo area. Not so much in Southern China. What it means is that shipping lines are, and also in Nansha as well.
During the Chinese New Year, the channel was affected because there were vessels sunk into the channel, and that affected the Chinese New Year peak season at both Shekou and Nansha as well. Yantian and Hong Kong being fairly unaffected by the port congestion, we're seeing volume growth as a result. But for us, we're seeing marginally more storage revenue just because of some of the Middle East goods being stuck and couldn't leave. But not significant. Not unless we're seeing kind of like a COVID full congestion do we see a massive increase in storage costs. For the time being, both Yantian and Hong Kong's operating normally. But if the Red Sea is starting to flare up again and things get worse, we can potentially see more of a backlog coming in. We'll have to see and watch carefully.
Finally, on the DPU, I think for us is a function of several things. Like you said, whether the throughput, the growth will continue into a second quarter and how much into the fourth quarter, whether the Fed will increase interest rates. That will have an impact on our interest costs, as well as the refinancing the $500 million that we have to refi, at what rate and where HIBOR is going. All these things come into play a lot in the DPU. That's why for us, we had a decent first half, but I think we're watching carefully how things transpire in the second half before we decide on what the full year dividend is. For now, we're just kind of maintaining the current flow for now.
Understood. Thank you, very clear.
Thank you, Herbert.
For the next questions, Paul Chew from Phillip Securities. Please go ahead with your questions.
Yeah. Hi. Thanks again for the presentation. Just one topical question, if I could. Despite the tariffs by the U.S. on China, were you surprised that shipments to the U.S. still grew at quite a significant pace, considering your baseline assumption is usually only 1%-3% volume growth every year, if I am not mistaken? Thanks.
Okay. Thanks, Paul. Well, actually, if you kind of split up the first half into two quarters, right? U.S. volume was actually down quite a bit in the first quarter. It was down double digit at 12%, 13%. It was not until the meeting between Chairman Xi and President Trump, where people get a sense of relationship normalizing, when things suddenly, people are saying, "Oh, well, we better get whatever is in the warehouse in China out the door into the U.S." And there is a lot of replenishing impact as well. And also, I think the fear of USTR 301 coming back in the fourth quarter and impacting freight rates again. So there was a massive flow out in the second quarter. So it has been a very volatile first half, if you will. So yes, we were caught a bit surprised.
That is why freight rates have actually gone up on U.S. by quite a bit because of capacity constraint. And that is good for shipping lines, but these kind of boom bust quarters for shipment is actually not good for retailers, for planners and for port as well. We are either waiting for ships or suddenly we are handling multiple vessels in one day. So it is actually not good for planning, but we will take it. For now, it is still, again, as I said, looking into June and July. I think we are still okay, but there is a worry that it will start taping off in August.
From your lens at least, does it mean that even with this tariff, Chinese goods are still as competitive?
Oh, yes. From that point of view, yes. I think Chinese good is still really, really relevant, especially on the e-commerce side. It depends on which commodity and sector, right? There's the EV, there's the solar panels, and the batteries. Those tend not to go to the U.S. and they are more concentrated in the northeastern part of China, whereas in the southeast side is more on the e-commerce side. We have actually seen strong growth from the e-retailers. Not just to U.S., but to Europe as well. It's not like the Europe economy is doing very well, but the fact that these relatively cheaper price-competitive e-retailers are actually doing quite well in the market as we speak.
Okay. Thanks for that. Just two more last questions. When you refer to congestions helping transshipment in Hong Kong, could I trouble you maybe elaborate what would be a typical route or maybe a typical port that may have been congested, and as a result, they have to divert more to Hong Kong? An example, if possible. Thanks so much.
Yeah. I think Singapore would be one, and certainly some of Shanghai. Hong Kong, I think in terms of location is quite good. In terms of in between connecting Shanghai, Ningbo, as well as Singapore. Ships don't have to wait. The ship size are getting large. So the chartering rates of ships, if they have to wait at anchor for three, four days, could be in the hundreds of thousands of US dollars on a per vessel basis. With Hong Kong having excess capacity, it just naturally soak up some of that ships. A lot of them can be east, west, north, south trade, even inter-Asia connecting to it as well. We have all sorts. It really depends on the network arrangements of shipping line.
For example, Gemini Cooperation, with Maersk and Hapag-Lloyd does most of its transshipment in Yantian, whereas MSC is looking to do more because MSC historically rely on more on Singapore, but MSC is now putting some of their strengths into Hong Kong as well. It really is shipping line specific.
Okay, thanks. Just one last one on just the Red Sea again. The conflict is starting to happen again. I am just wondering, how does it kind of impact you? Or may not be material because probably that shipping lane was not really used much anyway.
You mean on field?
Oh, no, on Red Sea again, the conflict seems to be flaring back up again, yeah. I am just wondering has been impact from you, per se, yeah.
Well, Red Sea is not fully open, so a lot of shipping are still using Cape of Good Hope to circle around. I think in the end it is just conflicts, meaning that there is impact to ports. Sometimes the congestions do kind of blow back as soon as ports start getting affected as well. These are the things that we are watching out carefully. Europe is actually fairly congested at the moment. With things kind of flaring up again, it will start kind of like during COVID, going back to Asia as well. That is the worry that we have.
Yeah. I just want to say, you did mention that the volumes benefited a bit of some of the empties coming back. That usually happens, but just wondering, was there anything unusual for the first half?
Not so much other than during Iran, a lot of the Middle East goods couldn't get in through Hormuz. Actually, some of the ship has to unload some of the boxes at the port. We benefit a little bit from the storage income just because the boxes, they couldn't leave. The sellers either find new sellers elsewhere, and reroute the goods, so they end up spending a bit more time in port. We did have a bit more storage income as a result of that.
Okay, got it. Thanks so much for taking my questions. Thank you.
Thanks, Paul.
Mr. Bruce from UBS, please go ahead with your questions.
Hi. Go ahead, Bruce.
Hi. Yeah, hi, Ivor and Ivy. Thanks for taking my questions. My question actually is regarding the tariff outlook. Actually, it has been nearly five years since the last round of tariff hike. Shipping companies actually, were making decent earnings in the past few years. Can we expect another round of tariff hike in 2027 or 2028? That's my question.
Right. For us, in fact, Yantian, we typically do raise tariff as and when shipping lines contract come due, and we try to negotiate more like kind of CPI inflation type of low single digit tariff increase. Yantian has been getting a tariff increase over the last couple years as well. Hong Kong, on the other hand, because Hong Kong is losing business. Hong Kong, we have not had any tariff increase for quite a while. We have adjusted some of the local cargo fees, but those are minor, not significant. You wouldn't see an ASP increase in Hong Kong, but you would expect ASP increase in Yantian. Also partly because some of our tariff is based in RMB, and RMB has appreciated as well. Definitely low single digit for us, ASP growth in Yantian.
Yeah, thanks. Can I follow up? Currently, how much is upside compared with the capped pricing we filed with the government compared with our current actual pricing?
Oh, you mean the published tariff versus what we have? We're actually fairly close to the published tariff already. But on the transshipment side, there's room, so it really depends on the specific trade and shipping lines. Our rates, there's a variety of different rates depending on volumes and shares. We aren't quite ready to kind of push that cap yet. China is looking, Yantian, but I think China's looking to relax some of the port tariff increase for Shanghai and northeastern part of China. With those other Chinese ports raising tariff, it would give us a bit more room as well.
Yeah, great. Thank you, Ivor .
Ladies and gentlemen, due to time constraints, we are not able to accommodate all the questions. Apologize for any inconvenient caused. This concludes today's conference call. Thank you for your participations. You may now disconnect.
Thank you, everybody, for joining. Thank you.