Ladies and gentlemen, welcome to the conference call of Hutchison Port Holdings Trust Annual Results Announcement for the Year ended 31st December 2025. Now, I will hand over to Mr. Ivor Chow, the CEO of Hutchison Port Holdings Trust. Mr. Chow, please begin.
Thank you. Hello, everyone. Thank you for joining our 2025 results announcement call. As usual, today, I will give you a lowdown as to how the second half of last year went, as well as giving you some thoughts as how I see 2026. Then I will talk obviously a little bit about the DPU distribution and how I see it going forward. Then I will hand over to Ivy, our CFO, to quickly cover the figures. Then we will finally end it with Q&A, depending on what you guys want to ask me about. Overall, if you look at our results, you would say I am actually overall pretty happy with the 2025 results. It was obviously a fairly difficult year.
The shipping market was particularly volatile, given what is happening around the world, the geopolitical tensions, the tariff war, and all the things that is happening around the world has had an impact to the stability of the shipping industry and the movement of goods overall. Despite all of that, we achieved a throughput growth above 3%, whereas most of our growth or almost all of our growth is driven by the growth in Yantian. Almost 7% year-on-year growth, while Hong Kong continue its decline that we have seen over the last couple of years. I will talk individually about them as well, but overall, if you look at the individual trade, if you will, obviously U.S. is affected significantly by the tariff imposed on China as well as other parts of the world.
If you look at the U.S. trade alone, especially export from Yantian is almost down 10%. The good thing is China export to the rest of the world, including Europe, continued to do quite well in 2025. Europe was a bit of a surprise. It actually increased 14% year-on-year in 2025, despite whatever is happening around the Red Sea and around the Suez Canal. We can actually definitely see that China is actually pivoting away from relying on the U.S. market alone. But growing substantially is Europe, Middle East, and Southeast Asian trade. For Yantian, other than export, Yantian has also benefited a lot from the Gemini Alliance, which I talked about last year as well. Yantian was picked as the transshipment location for South China. Yantian picked up a lot of transshipment, including some of the transshipment from Hong Kong as well.
In some sense, you can look at there has been some shift of volume from our Hong Kong operation into Yantian. Overall, the trust, it doesn't really suffer from that transition, because Yantian margin is as good as Hong Kong. Overall, I think we did quite well. Obviously, we have refinancing done last year, which kind of increased our interest rates. In 2026, we have two more refinancing to be done as well. We are definitely on the lookout on how interest cost is going to affect us going forward. Overall, as I said, we did quite well overall 2025 year-on-year. From a profitability standpoint, we've done okay. I'll talk a little bit about DPU, obviously. We've decided on a full year distribution of HKD 0.115 per unit, which is slightly lower than what we had in 2024 of HKD 0.122.
It's about 4% or 5% decline versus last year. There are a couple of reasons for that. Obviously, it is still within what I was hoping for. We've done well on the profitability front. Our cash flow actually increased as a result of a higher profitability. But it is negatively impacted by two things. Number one of all, obviously, when we ReFi our average cost of borrowing increased last year despite us paying down debt. That offset some of it, but interest cost, it has gone up, number one. Secondly, we're also impacted by the fact that Yantian, starting with 2025, we've started with the making statutory reserve in our Yantian operation, where previously with no foreign joint venture, we were excepted from the statutory reserve. But because China changes company law, Yantian is no longer exempted from making these statutory reserves.
We have to start making that 10% reserve in 2025. That, in some sense, reduced our ability to dividend out almost close to about HKD 200 million in distribution. That affected almost close to around HKD 0.02 of DPU right there. In some sense, the profitability growth offset some of that statutory reserve requirement, and we ended up with a slightly lower DPU compared to last year. But looking at the upside, I suppose, we've managed the interest cycle very well. Most of our borrowing was done five years ago when interest rates were around, inclusive of the margin, we were paying close to around 2% interest costs on average. With the refinancing, we're now looking at 4%- 5%. But I think with the final two refinancing done this year, I suppose we would have fully moved into the current interest cycle.
With the expectation that Fed rates will come down hopefully further in 2026, I think this would be the peak of our interest costs in 2026 and maybe 2027. If we can continue to grow on a volume and profitability front, then possibly 2025, 2026 will be the bottom year of our DPU, and then we can start growing DPU again, based on profitability. Looking out for 2026, so far, obviously looking just in January alone, things are still good. Chinese New Year, there's been a slight rush in Chinese New Year, but I think a lot remains to be seen what happens after Chinese New Year. Will U.S. pick back up again? Some of the new trade agreement that China will have with Europe, with Canada, will those pan out?
Meaning that will other trade continues to climb to offset some of the U.S. decline or will U.S. consumption kind of stabilize with interest rate coming down? All those questions we'll be on the lookout for in 2026 as well. But with those trade agreements that China will strike with the various countries, one of the things that we'll be on the lookout for is obviously on imports. Imports have been fairly weak for the last two years, just because of the economic situation in China. So import has been on a decline. But I think that with these new trade agreements that China will have with Europe, with Canada, with rest of the world, I believe that China will, not be forced, but they will be looking to boost up their import to honor some of these trade agreements.
We would be looking out for increases in import, probably in the second half of this year. And currently there is a large trade imbalance where our export outweighed our import almost 80%-20%. So there is a lot room to grow in terms of the import side, and that's something to watch for both Hong Kong and Yantian. Hong Kong is actually not quite suitable for import, and the lower import has actually hurt in Hong Kong. But if I talk about Hong Kong alone last year, yes, volume has come down, but if I look at the silver lining of the Hong Kong volume, you would see that export and import coming into Hong Kong has actually remained stable. It has not declined any further like what we have seen in 2023, 2024 after COVID. So the local market import-export has actually stabilized in Hong Kong.
What Hong Kong has been losing in 2025 was mostly transshipment volume, as well as some intra-Asia volume, but mostly on the transshipment side. As I alluded earlier, a lot of that transshipment either shipped to Western Shenzhen or to Yantian. So whether Hong Kong 2026 will be the bottoming out of Hong Kong remains to be seen.
But I think Hong Kong has been in a transition over the last two years. And not just on the port alone, but on the whole of Hong Kong. I think the economy is starting to rebound a little bit. Property is on the rebound a little bit and we're looking at to whether we can have Hong Kong remain stable this year and try to regrow that business together with Yantian going forward. I'll pause here and then I'll hand it over to Ivy to talk a little bit about the P&L, and then we'll move on to the Q&A. Thank you.
Okay. Hi everybody. Basically, if we talk about throughput, as Ivor mentioned, Trust has done well for 2025. Throughput is at HKD 23 million, 3% better year-on-year with Yantian growing by 7% but offset by the drop in throughput in Kwai Tsing by 6%. If we look at the revenue front, total revenue is at HKD 11.9 billion, 3% improvement year-on-year. In terms of the segment information, pretty much the split between Hong Kong and Chinese mainland is roughly comparable to 2024 with a 2% point increase in Chinese mainland for 2025. On total CapEx, it's HKD 445 million, a 20% year-on-year increase, or equivalent to around HKD 74 million.
The increase is just largely due to operational upgrades that have been carried out both at Yantian and Hong Kong, such as heightening our QCs, and just making improvement to support our conversion to using remote RTGCs, etc . If we move on to just look at our financial position in terms of debt, what you'll see in 2025, the short-term debt has increased, but that's largely just due to the two guaranteed notes that we have expiring in 2026. One in March and then one in September time. If you look at the total consolidated debt, because we have continued with our deleveraging program of repaying HKD 1 billion on loan. The total consolidated debt actually dropped 4% year-on-year to around HKD 24 billion.
With the increase in cash that Ivor mentioned earlier, the net attributable debt has actually dropped by 6% year-on-year to around HKD 17.9 billion. As Ivor mentioned, the trust will be declaring a DPU for the end of the 31st of December 2025 at HKD 0.115 , and we'll be making that distribution payment on 27th of March 2026. Lastly, I just want to go through quickly the trust P&L. As mentioned earlier, in terms of revenue, we had a 3% year-on-year increase. In terms of operating expenses, we actually have a 1% improvement. That gets us to our total operating expenses of around HKD 7 billion, with operating profit having an 8% year-on-year growth to HKD 4.7 billion.
As Ivor mentioned, despite the fact that we refinanced our debt in February at a higher rate, overall interest cost for the trust actually recorded a 6% saving, largely because of the lower average HIBOR during 2025, which benefited for our HIBOR-based bank loans, plus the deleveraging that I mentioned earlier on the HKD 1 billion repayment. Profit before tax is 12% better at HKD 3.8 billion, and then profit after tax is 13% better at HKD 2.5 billion, resulting in a profit after tax attributable to our unit holders at HKD 748 million, 15% better year-on-year. That concludes our update on our results.
Let's move to Q&A.
We will now begin the question- and- answer section. Participants with questions to pose, please press star one on your telephone keypad and you will be placed in the queue. To cancel the queue, please press star two. Mr. Herbert LU from Goldman Sachs. Go ahead, sir.
Hi, Ivor and Ivy, for hosting this briefing. Can you hear me?
Yeah. Hi, Herbert. Go ahead.
Okay, great. I am Herbert from Goldman Sachs. At first, congratulations on this good result despite the disruption of trade in 2025. Actually, I have three questions. Sorry, I dial in a bit late, so apologize if you already covered these questions in your presentation.
I am sorry.
Yeah. Our net profit increased by 15%, while DPU is a bit lower than last year. I noticed your presentation attribute it to the increase in the reserve set aside in 2025 for Yantian. Could you please elaborate more, and will this trend continue in 2026? What is your guidance for the range of DPU in 2026? Second question is, I know it is difficult to predict the container volume, but I still want to check what is your outlook on 2026 container throughput and ASP. The third question is on operating expense is down by HKD 80 million year-over-year. What is the main driver? Thank you.
Thank you, Herbert. Good questions. I will start with number one first on the DPU side. You are correct. As I said earlier, the net profit increase have given additional questions cash flow, but it is offset by the statutory reserve because of the PRC requirement. What the statutory reserves are basically for all PRC companies, they are required to make reserve for, let us say, welfare fund, staff fund and all that. Typically, it is around the 10% range. Okay? So every company does it in China. But because we are a Sino-foreign joint venture, we have been actually exempted previously from making these reserve. Okay? So the reserve is actually a percentage of the registered capital that every company has to make. So that is the first thing we have to do.
Because of the change in the company law in the PRC, Yantian, even though it is a Sino-foreign joint venture, is no longer exempted from making the statutory reserve. What the statutory reserve are is basically limitation of the amount of dividend that you have, then can give a dividend out to shareholder, and the cash will have to remain at the company level rather than distribute out to the shareholders in that sense. Every year, we do expect that going forward, we will have to make that reserve, which is around 10% of our profitability, net profit that we have every year. This year we expect the amount somewhere around HKD 200 million. I think that HKD 200 million will have to continue until we reach the statutory requirement of 50% of the registered capital. That will probably take around 10 years or so.
If you look at around HKD 200 million of cash flow that we are unable to distribute out from Yantian, that will translate to roughly around HKD 0.25, but we have been able to offset some of that decline of HKD 0.25 by, as Ivy said earlier, we have managed our interest costs better than we have expected because HIBOR is low this year compared to the U.S. rate. So we have actually benefited from that. But HIBOR actually has climbed back up, and therefore we do expect some of that savings that we have interest to be not available in 2026 as well. Hence, overall net net, if you take a look at the increased profitability, a little bit less interest, but offset by that statutory reserve. Hence, our actual distributable cash is only about HKD 0.115 cents.
In terms of what I see next year, couple of factors. Number one is interest costs. Whether the Fed rate will reduce. The Fed rate will be an important factor, number one. Number two is obviously we have two refinancing to be done this year, and the ability to refinance at a reasonable rate will have some impact on that DPU assessment. Number three obviously is the profitability, and I will answer question number two later on. Finally, depending on the overall market, the trade war, some of the things that we are watching for is the reopening of the Red Sea, whether the Red Sea conflict will be able to resolve, and how that resolution will impact trading will have a big impact on our volume as well. So that is something that we are watching out for as well.
Those are the couple of factors that I looked at that may impact DPU next year. But overall, I am looking at somewhere between HKD 0.11- HKD 0. 12 . My personal target is try to maintain that HKD 0.115 if I can, despite having that HKD 200 million reserve going into 2026. But if we can have volume growth as well as managing interest costs better, then there may be a chance. So that is your question number one. In terms of question number two, obviously, it is quite difficult to forecast. The world is extremely volatile, especially with the tariff policy and the various new trade agreements happening around the world. But overall, if we look at industry as a whole, for a baseline every year, I do look at a low single digit, maybe 1%- 3% type of volume growth every year.
I am still looking at that. That's something we do try to achieve every year, be it from transshipment, be it from import or export. The shipping market in general tends to look for that type of growth as well. That's in terms of growth in Yantian. Obviously Hong Kong, some sense of stability in Hong Kong would be good enough for me. In terms of ASP is affected by a couple of factors. Most of our ASP growth is obviously driven in Yantian. If you talk about ASP, because the renminbi fluctuation will have an impact on ASP, that's something to watch for. Renminbi fluctuation is something that we cannot forecast. The second of all has to do with the mix, the trade mix.
Whether the growth is focusing more on U.S.-European trade, or whereas the growth is focused on the intra-Asia trade and Middle East trade, or the growth happening in the transshipment trade all have an impact on ASP because the margins in U.S. and Europe is a bit better, whereas the margins for transshipment obviously is lower, and that affects ASP as well. These are the factors. But overall, are we seeing underlying pricing growth? Yes. We are trying to recover a cost increase through tariff. That's something we always do on an annual basis when we negotiate a contract with shipping line. The underlying ASP may increase, but whether renminbi increase or decline, or whether the different mixes increase or decrease will affect the overall ASP. But I do see underlying ASP increase. That's not something that only Yantian is doing.
If you look at ports, north and eastern port in Shanghai and Ningbo, my understanding is most of those ports are looking for a pricing increase, and some of them to the tune of over 10%, because they have not had that ASP increase over the past couple of years. Yantian being a price leader in the market, where we price according to supply and demand, obviously our competitor rating the pricing is actually good for the overall market. That's something I would say ASP is definitely not overly pessimistic. Finally, on the operating expenses side, most of that saving is not really from the Yantian side, more from the Hong Kong side. Because Hong Kong, obviously with the volume coming down, we have been having some of the facility underutilized.
So we've been saving a lot operating costs, shaving a lot of costs as a result of some of that volume decline. Most of that operating cost is mostly from the Hong Kong side. Obviously, if there are more downside risks on Hong Kong side, we'll look to further shave costs. But again, if Hong Kong can stabilize this year, then I do not see that we would be expecting continuing reduction in operating costs.
Thanks. Just a follow-up on the ASP. You mentioned the underlying ASP may increase for Yantian. That already factor in the box mix change. Yantian now has more exposure to transshipment volume, which may have a lower ASP actually. So your forecast ASP to grow is already factoring the mix change?
I cannot really forecast mix change. When I comment on underlying ASP, it is just underlying tariff with the shipping lines. That is like inflation-adjusted or CPI-adjusted or even low single-digit increase on some of it. How the renminbi change or how mix change is difficult to forecast, especially individual trade. Again, what I said earlier with the various trade agreements happening, will trade between China and Europe increase? How fast that increase will. Will it be faster than some of the transshipment or MTs increase? It is really hard to forecast. I do not typically forecast mix change or renminbi change. I only forecast underlying ASP change. The positive side is just on the standalone tariff.
Okay. Got it. Very clear. Thank you very much.
Thank you, Herbert. Any question?
Deepak Maurya from HSBC. Go ahead, sir.
Hi, Deepak. Go ahead.
Hi. Good evening. Good evening. I hope I am coming through well. A couple of questions for you, Ivor, and then a couple of questions for Ivy. Firstly, if you could help us understand how the throughput has trended so far this year. Whatever you possibly can share on how the trends are in Yantian and in Hong Kong.
Okay. Yantian, as I said, overall, Yantian grew about 7% last year. First half was strong. If you look at the last results that we had, first half was quite decent. Mostly because of front loading to avoid the tariff. We had a bumper first quarter, when people rush out the volume ahead of the tariff. Second quarter trend in line. Third quarter was actually quite slow. Third quarter was traditionally the peak season. I think there was a lot of uncertainty as to what the Trump administration was going to do. There was a lot of uncertainty.
Third quarter was quite slow. I would say that fourth quarter was actually, in some sense, surprisingly strong. Not so much on the U.S. trade side, but Europe was a bit of a surprise. I think overall, Europe grew double digit in the fourth quarter, helped offset some of that decline that we saw in the U.S. It is quite volatile right now. Every quarter tracks differently just because depending on, shippers now take advantage of windows where they feel safe and windows where there is a volatility, and they try to avoid. It is very difficult to forecast. So far, as I said earlier, January is looking okay. Pre-Chinese New Year, there was still a rush in Yantian.
Again, hard to say what is going to happen after Chinese New Year. Shipping lines are, I wouldn't say pessimistic, because it varies. Some shipping lines are a bit more optimistic, some are a bit more pessimistic. There is not a lot of direction at this point in time. I am a bit more confident the other markets will fare better than the U.S. market. That can change in a flash. That is for Yantian. Hong Kong, as I said earlier, Hong Kong is actually stabilizing on the import/export side. We haven't seen decline last year on import/export. Hong Kong has seen most of the decline on the transshipment side.
As I said earlier, most of the transshipment is either transferred to Yantian or some of them went to Nansha and Shekou. Hong Kong did see continuing decline in transshipment. The lucky side of it is because transshipment tends to be lower margin. It doesn't hurt our bottom line as much, and we have been able to pick up the transshipment loss in Yantian. Overall, the trust overall didn't suffer. Hong Kong is still negative on the transshipment volume decline side.
Okay, that is very helpful. My second question to you, Ivor, is about the Yantian East expansion. If you can provide some update on where we stand on the project, when do you expect it to commence, and if there are any further capital commitments from the trust side towards this project?
Okay. On the East Port front, I forgot to mention that. East Port continues to be on track, on target. As I said on, I think the last call as well, we are slated for trial operation in first quarter of 2027. We are still on target for that. We have already completed all capital injection and requirement into East Port. There are no further capital requirement from the trust.
Okay. How much could you remind us, because this has been a project which has been in the works for quite a few years? When you start off in 1Q 2027, what is the kind of capacity which will come through in early phase, and how do you expect the ramp up to phase two over the next few quarters after it commences?
Sure. Just a quick update on East Port. It is actually three additional berth in the eastern side of Yantian, so roughly around 3 million additional capacity. If you look at Yantian, last year handled around 16 million TEU, which is a record high, by the way. That will add capacity by about 3 million. When we finish the whole East Port expansion, we will be looking at a nominal capacity around 20 million, which we are handling 16 million right now. We will be rolling out the first berth next year. So roughly around 1 million additional capacity with each berth.
Over the next two years, we will expand, and release one berth additional every year. To help you think about how I think about capacity, right? If you think about Yantian, last year we were doing 15 million, and this year we grew 7%. We actually grew 1 million TEU this year. That is actually one requirement that we need in order to cater to the demand. That just gives you a feel of how we think about capacity increase.
Okay. That is helpful. Maybe for Ivy, if you could help us understand what the CapEx will be this year, for the trust, where do you expect to expand it? How much of that will be maintenance? I know in the past you have mentioned that about HKD 500 million is the maintenance CapEx, irrespective of how trade pans out. If you could help us revisit those numbers as well.
I think as we mentioned, we are currently still expecting maintenance CapEx to be around that HKD 500 million full-price figure. This is what we will aim to maintain. It is in line with the guidance that we have given out in the past for 2026 as well.
Okay. Finally for you, Ivy, you mentioned in the presentation that about 52% of the debt is fixed rate. Of the floating rate debt, how much of it is more reliant on the HIBOR versus the U.S. policy rates, o r it does not matter and just depends on the overall interest environment?
Well, I think that depends on the overall interest environment. But currently, all our floating rates are actually HIBOR-based loans.
Mm-hmm. Okay.
The rest are fixed as U.S. dollar.
Yeah.
The reason why we have swapped some of the fixed rate U.S. into HIBOR is just because HIBOR was a lot lower than the U.S. rates last year, and we benefit from that. But with HIBOR coming back up, we will have to manage the spread carefully. But for us, there is no exchange risk on either front. So we swap just more opportunistically and especially, we have actually moved away from a higher fixed proponent compared to before we are closer to 75%. We are moving lower down into the 50% range just because, overall, I think the market agrees that the current interest rate environment is past the max, and we could potentially be looking at slightly lower interest rate environment. So it would be beneficial for us to maintain slightly more floating in our portfolio.
Okay. That is very helpful. And maybe, if I can just squeeze in one more question. In the presentation, you did mention about headwinds to Chinese exports from the Mexico tariffs. Now we know about the U.S. relationship, but that was the first I saw of Mexico. Is that a significant route or is it still more U.S. and Europe exports? If you could also remind us what the mix now is, or in the second half it was for the trade exposure to Europe versus the U.S. trade lane.
Yeah. Well, first of all, overall, U.S. continue to account for about 30%-40% of export. With that number now closer to the low 30s compared to the high 40s before. Europe traditionally is somewhere around 25%-30%. I think it's creep up 1 or 2 percentage point only. But transshipment it picked up a lot. Transshipment in Yantian went up quite a bit last year. So I think it went from around 15% to around 20% right now.
20%-25%.
Yeah, 20%-25%. The pickup is mostly on the transshipment side. And that affected ASP a little bit, kind of alluding to Herbert's question earlier. In terms of the Mexican tariff question is when the U.S. imposed tariff directly on the country of origin in China. Chinese exporter try to, well, not circumvent, but they have increasingly set up their new manufacturing bases closer to the destination, be it Mexico, Vietnam or some parts of Europe. So these tariffs that are put onto intermediate manufacturing locations like Vietnam and Mexico will indirectly affect trade to the U.S.
That's why we talk about the headwind, but it mostly affect the U.S. Anything else. But as I said, European trade so far, we haven't seen a negative. In fact, we've seen positive out of the European trade. I think partially because Europe, instead of buying from the traditional European retailer, they're actually buying more from the e-commerce companies in China just because it's cheaper there. That has attracted a lot of European trade out of Yantian, where we handle a lot of the e-commerce business to Europe.
Okay. That is excellent color. Thank you very much. I will step back for now, and I will join back if I have any further questions. Thank you and have a great day.
Thank you.
Mr. Paul Chew from HSGO Research. Please go ahead, sir.
Yeah. Hi. Thanks so much for the presentation. Just some questions on the, I guess, fluidity of the supply chain. Can you just elaborate a bit, when you mentioned the gradual resumption of services on the Suez Canal, is that what the major liners are preparing you for? Could you maybe elaborate on the impact if it does really open. Is it just that there will be a short-term congestion in Europe, that is what worries you?
Yeah. Thank you. The question surrounds what is going to happen with the Red Sea situation resolved. If you look at some of the news in the market, some shipping lines are already testing the Red Sea to see whether it is safe to pass through the Suez Canal already. Some lines are trying that. To kind of dial back a little bit. Right now, currently, almost all shipping lines from the Asia-Europe trade goes through the Cape of Good Hope in South Africa, and that adds quite a bit of additional transit time into Europe. That absorbs quite a bit of capacity out of the market, and that allows the shipping lines to maintain freight rates that they have enjoyed over the last year or so.
I suppose the concern here is that when the Red Sea does reopen and the Suez is passable, then at that time, there would be ships going through around the Cape of Good Hope. But at the same time, there will be ships racing from Asia through the Suez into Europe. There will be two sets of ships, because the slot cost for shipping line going through the Suez is going to be cheaper, so the margins for shipping lines is better. People ideally, when it is reopened, everybody will rush through the Suez to try to reach Europe ASAP. I suppose, as you alluded earlier, the concern is what would it do to the ports on the European side? Currently, I think, generally, there are port congestion in Europe already, even with the Red Sea situation.
The concern is once the Red Sea opens and there is a race to Europe through the Red Sea to the Suez, that would cause a major disruption to the ports at the destination in Europe. That is a concern of mine, obviously. Whether the shipping line can withhold the capacity and not clock up the ports in Europe remains to be seen. But if there is a congestion, it could be a substantial one, because the ships going to Europe are really the largest vessels in the world. Even five or six or even 10 vessels can potentially clock up the system, like they did during COVID, for an extended period of time.
How that will impact the supply chain in terms of how you say the fluidity and whether some of that congestion will start to come back and hit Asia is something that I am on the lookout for. But right now, it is really difficult to foresee when and if that will happen. The likely earliest that Red Sea will open will probably be in the second half of this year, b ut that is an event that we will look out for.
Thanks so much for the color. My second question is, I think in the prior call, you did allude that shipments to the U.S. by your e-commerce customers, they prefer to use ships because it is cheaper. Because of the high tariff, they are using ships. Do you still see that phenomena, or that has maybe passed?
Well, I suppose what I saw in the second half, obviously U.S. trade has declined, so overall declined 10%. I think if we look at South China versus the rest of the China, especially in Northeast, I think the decline would be higher than 10%. I do not know exactly the numbers, but as far as I know, I believe that the decline is a bit more substantial than 10%.
The reason for that, I believe, is that e-commerce, because of our focus in e-com in the southern part of China, especially in Yantian, that has allowed us to be a bit better. E-commerce continues to do well. That segment of the market, even the second half, continues to do well. Obviously, that can change depending on the tariff situation and whether they tighten the tariff on the small packets. For now, that segment of the market continues to do okay. Quite well, actually.
Okay. Yeah, thanks so much. I guess my last question is, I think the first time Port here is mentioning that some optimism over imports, is it the similar sentiment you get from the shipping lines? Or I guess it is been or more of your own analysis kind of thing.
Right. On the import side, it is more of my own, than anything else. Obviously, with the trade imbalance, we have always felt that China has more room to grow on the import side, especially import being a fairly small proportion of our business. But the relative margins for import and with the trade imbalance, shipping lines is much more proactive in terms of pushing for imports as well.
From my read on the macro environment with all these trade agreements that China is hoping to sign with European countries, I would expect that there would be a quid pro quo, with a certain level of imports coming into China. But obviously a lot of them depending on the recovery of the Chinese economy. But I am a bit more hopeful on that front. It is more of a personal, but I think shipping lines themselves, if there are imports, that they are happy to take the balance. Because for them, full out, empty in is not good for business.
Cool. Thanks. Just a quick follow on the earlier question. I am not sure if you or maybe you do not disclose the amount of shipments that goes to Mexico directly. Just something you do not give.
Mexico directly. I do not have that number with me, unfortunately.
Okay.
Typically, for us, the Latin America trade is relatively small. I think it is somewhere between 10%- 15% only. At most 10% actually.
But at the same time, I think in one of your statements you mentioned Mexico might still impact you, but if the direct shipments are small there, how is it kind of negatively impacting?
Well, I think what we are seeing is that the growth of the Mexican trade has been quite strong over the last couple of years. So that growth will slow down. That is what we are worried about.
Okay, sure. Thank you. Thanks so much, Ivor, for taking my question.
Thank you.
Ms. Wang Yijie from HSBC Investment. Go ahead, madam.
Hi. Can you hear us?
Can you hear me?
Oh, yeah. Please go ahead.
Okay. Yeah. Thanks very much management for your detailed explanation and presentation earlier. I have two small questions coming from my side. First, I see end of last year you have announcement saying that you need to sell back a land to Shenzhen, YTLAS for the redevelopment of the region for around RMB 50 million. I am wondering how do you see this.
First of all, I am wondering what is the use of this land in the past, and how do you see this sale may have impact for the expansion of your volume capacity in Yantian? Do you expect any other similar land arrangement in the midterm? My second question is that, for next year or midterm, should we expect similar debt reduction as this year, which is around HKD 1 billion debt reduction? Will this be impact by your increase of CapEx, like what we see for this year? Thank you.
Thank you. I will take the first question and then Ivy can talk about the debt repayment. In terms of the land that we sell back to the Shenzhen government, that piece of land is for I think I talked a little bit about last year. Maybe I should repeat that here. Intermodal is something that is a strategy for Yantian for the next 5- 10 years. Currently, we do have a dedicated rail link into Yantian in South China, where we are the only one that has an on-dock rail link into Yantian. But rail business only account for a fairly small proportion of our business to the tune of around 300,000 TEU, and we do 15 million every year, so it is quite small.
But as I said, with China moving a lot of the coastal manufacturing into the inland, particularly in Chengdu, Chongqing, Wuhan area, increasingly, I believe intermodal will be kind of the future of where the share of the market, in terms of volume, the competition will be. So the development of the rail link becomes quite an important preparation for Yantian if you look over the next five, 10 years. But because rail business tends to be heavily subsidized business, it is not a profitable business. So, the Shenzhen government has agreed to take back the land that we have, and they would be the one investing in upgrading the intermodal facilities that we have in Yantian.
So I think they're investing to tune around RMB 7 million in order to expand the rail link from roughly around 300,000 TEU to potentially above 3 million TEU by 2029, if the rail upgrade is fully completed. Obviously, it's going to be done in different phases, going from maybe 300,000 TEU to maybe about 1 million TEU first, and then slowly ramp up to eventually 3 million TEU. So still, compare 3 million TEU to 15 million TEU is still not a substantial number, but it is where the future growth for Yantian is, especially when I said earlier that we are completing the East Port development, where we have 3 million TEU additional capacity. So the rail becomes an integrated strategy in terms of expanding Yantian reach from currently around 1,000 km to about 2,000+ km inland. So it is a strategy, and that's why we're selling that piece of land.
So yes, we will continue to have I think we already announced already pieces of land that we have sold, that we would have an impact to us this year. We have some gain this year we will be booking. But the important part of that selling piece of land is more the long-term intermodal strategy for China, not just for Yantian, but overall for China.
And I think I talked about a little bit before, it's exactly what the sector U.S. is doing. If you have shipment into L.A. and Long Beach on the West Coast in the U.S., the rail becomes quite important of shipping that goods into the Midwest in the U.S. So I think for China, it's the same thing. Again, you talk about export coming in, but in future, there will be more import coming into Hong Kong and Yantian, connecting to rail to the inland part of China as well. And that's something for me, upgrading the rail facility is paramount to capturing that particular growth market over the next 5- 10 years.
Hi. In terms of your second question, obviously depending on how the operations pan out in 2026, it is still our intention, to continue with our leverage program to do the HKD 1 billion repayment in 2026.
Okay. Understand. Thanks very much, management for the explanation.
Thank you. Thank you for joining everybody tonight.
Ladies and gentlemen, as there are no further questions, this concludes today's conference call. Thank you for your participation. You may now disconnect.