"Swire Pacific" H1 2026 Earnings Call - Record Underlying Profit and Record Capital Investment Signal Broad-Based Recovery

Moderator: Good afternoon, ladies and gentlemen. Welcome to Swire Pacific 2026 interim results analyst briefing. Today at the briefing are: Mr. Guy Bradley, Chairman of Swire Pacific; Mr. Martin Murray, Finance Director of Swire Pacific; and Ms. Karen So, Chief Executive Officer of Swire Coca-Cola. Before we take a detailed look at our results, we’d love to show you a short video highlighting Swire Pacific’s key developments and achievements in the first half of 2026. Please enjoy the video. May we now invite Guy, Martin, and Karen to take us through the details of the results.

Guy Bradley, Chairman, Swire Pacific: Thank you. Good evening, everybody, and thank you for joining us. I will just kick off with a couple of strategic highlights here. The two points I’d like to emphasize are basically that the first-half Recurring Underlying Profit is the highest underlying profit that we’ve reported, and that’s driven basically by consumer sentiment in all of our divisions improving, and that’s a very good trend to see. The second highlight, of course, is that we haven’t stopped investing. The levels of investments that we have across all our businesses are indeed record levels of capital for the group. Two very good highlights for the half-year. If I look at the specific details, across the three main divisions in property, we continue to execute against the HKD 100 billion plan.

We’ve currently got seven projects in the Chinese mainland under development, which is more than we’ve ever had in our history. Two of which will open in phases—at least start to open—later this year in Shanghai and in Beijing at Taikoo Place. On the trading side, also, it’s worth highlighting that we’re doing a lot more of that, and we’ve got very good projects going on in Miami and Bangkok. What the slide doesn’t say is that we’ve also got quite a lot going on in Hong Kong, our home base, where our residential trading brand is extremely well-known and well-regarded. I can list 269 Queens Road East, LA MONTAGNE, THE HEADLAND RESIDENCES, and the project in Pan Hoi Street. We’ve got four projects there to be going on with. Quite a lot of activity on the residential trading side.

Switching over to beverages, the integration of the new franchises in Southeast Asia is progressing well. We’re very happy that we’re able to expand, firstly, into Vietnam, Cambodia, and then into Thailand and Laos. Those territories are in the process of integrating into our business at all sorts of levels, and we’re happy with how that’s all going so far. Focusing on the Chinese mainland, we have a CNY 12 billion investment plan to open up new facilities and to invest in market cold drink equipment. We continue to push that out.

On the aviation side, you heard yesterday about the Cathay Group and their HKD 150 billion investment, but I’d just like to highlight the HAECO side of aviation here, and they have a new Xiamen facility opening later in the year, and they’ve just announced a new investment in Vietnam as their first expansion of the base maintenance business into Southeast Asia. Lots going on. On the financial side, Martin will cover that shortly in more detail, but we’re very happy to report that underlying profits increased by 43% versus prior year to HKD 7.8 billion, and in turn, we’ve announced a 15% increase in the first interim dividend to HKD 1.50 per share.

Just looking at the recurring level by division, the Recurring Underlying Profit for the first half was HKD 7 billion, which was up 48%, and the positive news was across all the three major divisions, as you can see here: 37% up in Property, driven obviously by residential trading and that extremely good sale of the 6 Deepwater Bay Road property, but also accelerating retail performance in both Hong Kong and the Chinese mainland. On the Beverages side, they had a good year driven mostly by an improvement in the Chinese mainland. RUP was up 5% in Beverages, and Aviation 39% increase. Cathay speaks for itself. You’ve seen that yesterday, but I’d also like to say that there was a very good, sort of, robust demand for HAECO and their base maintenance and engine overhaul services.

Very encouraging signs across the three major divisions in terms of profit contribution. With that, I will ask Martin to dive into the financial side in a bit more detail. Thank you.

Martin Murray, Finance Director, Swire Pacific: Thank you, Chair. As the Chairman mentioned, all the core divisions are performing incredibly well on the back of strong consumer sentiment, which has led to strong profit at both the underlying and at the recurring level, which is very pleasing to see. You can see that that leads to strong cash flow, reduced gearing, which allows us to have the record investment and maintain our progressive dividend, which is up 15%. This slide is a bit repetitive. It shows the movement in the Recurring Underlying Profit that the Chairman mentioned was at record levels. In the Property division, up 37%, primarily driven by the residential trading profit off the sale of 6 Deepwater Bay Road, but also the continued robust retail sales in the Chinese mainland and some positive momentum in retail in Hong Kong, which is pleasing to see.

Beverages up 5%, improving consumer sentiment in the Chinese mainland. Some more challenges in Southeast Asia. Some of the commodity prices have gone up, but again, the integration of that continues to go well. On the aviation side, really strong performance, up 39%, driven mainly by the high load factors yields from Cathay Pacific, despite the higher oil price in the second quarter. HAECO continues to go well in both the base maintenance and the engine side, and lower interest rates helping the head office and other costs. On the non-recurring items, these are mainly from the aviation division in the first half of 2026.

You’ll see the HKD 309 million and the HKD 434 million relates to the sale of the Cathay shares at the Swire Pacific level to get us back to the 45%. The HKD 434 million is the deemed disposal. The gain on the deemed disposal in Cathay of Air China. Last year, the big movement came from property investment, which was the Miami sale. That’s the HKD 833 million in 2025. On the liquidity piece, you’ll see that there is some refinancing in 2028, 2029. We’re going through that process now, and we’ll push that out to the 2031, 2032. We have our debt. This has come down 4%, and weighted average cost of debt is down as well at 3.4%. We’re in great shape on the balance sheet. Our fixed-rate borrowing is at 75%. This is just the overall picture that we get asked about in terms of the overall strategy.

As I said, we actively manage our balance sheet prudently. Our gearing has come down to 19.3%, weighted average cost of debt 3.4%, 75% at fixed borrowing rate. Our primary objective strategically is for long-term strategic investments, which we’re doing at record levels across all our core divisions. We focus on operational excellence, driving up returns through targets from each of the businesses. Roy mentioned earlier in the property business doing more residential trading, for example, and at the same time maintaining our dividend growth strategy and potentially looking at share buyback, but it’s in that order. With that, I will. Oh, sorry, there’s a sustainability slide I didn’t forget. I apologize. We have launched our SD 2050 slide strategy. We’ve moved it into reporting like the ISSB, so climate, nature, and social. So waste and water in that piece.

On the left-hand side, you’ll see our 2030 targets. On the right-hand side, progress against that. We’ve almost achieved our 2030 targets across climate and nature, and hit our targets for people and focus on the community. We’re making strong progress on our sustainability targets. With that, I’ll pass back to you, Chairman.

Guy Bradley, Chairman, Swire Pacific: Thank you. I’ll just take the property side. This is a familiar chart to everybody by now, but it keeps getting better. It shows that the HKD 100 billion plan that we announced, I think in 2022, is now almost 70% committed, and that’s across the three major core markets that we’re invested in. A bit more detail on the next slide, which shows that the pipeline is good. It’s diverse, and in terms of sector, it’s diverse in terms of geography. We’re having a sort of balanced investment plan as we go forward, and that’s what we want to see.

The first-half results, as I say, were driven significantly by the residential profit on the trading, but the encouraging note for me here for this half is that our rental income is going up, driven by—on the retail side—particularly driven by Hong Kong and the Chinese mainland portfolios, and that’s very encouraging from a future point of view. On the Chinese mainland itself, you can see now the two points here to note are that the contribution of gross rental income from the Chinese mainland is now almost half. It’s at 46% and growing. Specifically, if you look at the Chinese mainland retail, it’s now our biggest contributor in terms of gross rental income, and that’s an incredible performance that’s grown over the last 10 years.

Just looking at the Hong Kong office market, which has historically been our top contributor, obviously it’s a cyclical soft point, I would say. We’ve had a good defensive position with high occupancy through that soft part of the cycle. As you heard Tim say in the previous session, we’re now sort of starting to come out of that cycle with rents starting to go up, led in Pacific Place in our case, and we think that’s a good sign as we start to look ahead at the next two to three years. In terms of outlook, we think there’ll be positive momentum across all the different portfolios. We’ve got narrowing reversions in the Hong Kong office portfolio, and as I said just now, led by Pacific Place, probably a little bit slower in Taikoo Place.

On the retail side, we’re seeing positive growth momentum in the Chinese mainland and a sustained recovery in Hong Kong as confidence and sentiment improves. Karen, it’s like Coca-Cola.

Karen So, Chief Executive Officer, Swire Coca-Cola: Thank you. Thank you, good afternoon, everyone. I’m pleased to report that Swire Coca-Cola has delivered a broad-based growth. This performance demonstrates our effective strategy, our resilient portfolio, and our ability to execute with discipline in a very dynamic operating environment, serving a consumer base of nearly 1 billion people. Let’s look at the market overview. The first half of 2026 saw improving market conditions, particularly in the Chinese mainland, where demand rebounded in the fast-moving consumer sectors following a very challenging 2025. China’s consumer market remained broad and deep. It is also at the forefront of the digital retail space, and we are closely matching consumers’ changing consumption habits by capturing the volume growth in the e-commerce channel, immediate consumption, and also through our investment in the cold drink equipment for emerging new sales channels.

The conflict in the Middle East continues to drive uncertainty in oil and aluminum prices. This is a headwind felt by bottlers worldwide. While the input cost inflation has continued to weigh on our margin, particularly in Southeast Asia, we’re managing our exposure through advanced purchase contracts and commercial initiatives. The consumption trends are evolving towards a better value product. By maintaining a disciplined channel packaging pricing strategy, we are capturing the growth with affordable entry packs that meet the consumer needs. While the sparkling continues to remain our core growth driver, we are also rapidly growing our low and no sugar portfolio alongside a functional portfolio to meet the shifting consumer preference.

This shift in our product mix is already taking place in the key markets, highlighted by our successful consumer-led rollouts like Sprite + Tea, our expansion to the energy category through Monster Energy, accelerated growth of the zero-calorie sparkling drinks. We invest for the long term in every market we serve. That means the disciplined capital allocation, operational excellence, and a relentless focus on innovation. In Greater China, our major investment program, which was first announced in 2023, is well underway. We continue to advance our CNY 12 billion investment plan in new facilities and equipment in the Chinese mainland to support our expected growth. I’m delighted to report that in May, our two world-class intelligent green production plants commenced production in Kunshan of Jiangsu Province and Guangzhou in Guangdong. Together, they host over 20 production lines, they are set to boost our total mainland China production capacity by 10%.

Both of these facilities are integrating AI into our manufacturing process and are LEED Gold certified. Building on this momentum, construction is also underway for our new production facility in Hainan Province, targeted for completion by the end of 2027. In the Taiwan region, production upgrade work continues with a newly automated storage and retrieval system, also an expanded production line at our Taoyuan facility. Turning to Southeast Asia, we remain confident in the long-term growth potential of this market. Driven by favorable demographics, the potential of growing sparkling beverages in the market with currently low per-capita consumption and positive GDP growth. We have invested significantly in cold drink equipment and production assets, including our new affordable small sparkling package in Vietnam. We also continue to transfer digital expertise, operational know-how, and innovation from global best practices to our Southeast Asia businesses.

Underpinning all of this is our investment in digital and AI, and we’re building an intelligent enterprise on the foundation of modern process, trusted data, and a unified digital core. By scaling AI across organizations, we’re empowering our team with better insight, automating routine tasks, and enabling a faster, higher-quality decision. Let me walk you through our financial results. Our recurring achievable profit in the first half of 2026 was HKD 907 billion, representing a 5% increase from the same period in 2025. This was mainly driven by the robust performance in the Chinese mainland. In the Chinese mainland, recurring profit increased by 24% to HKD 727 million, driven by strong volume growth across emerging channels such as e-commerce. Our business in the first half year remained relatively insulated from the higher raw material costs due to our effective procurement strategy.

In Vietnam and Cambodia, recurring profit was down by 13% to HKD 98 million. That drop was largely due to. Strip out that one-off impact, achievable profit would have actually grown by 15%. In Taiwan and Laos, recurring profit went down by 10% to HKD 95 million, mainly due to a lower interest income. After cash was deployed to acquire the 30% stake in our Vietnam bottler. Excluding those impacts, the profit would have grown by 16% due to the strong sparkling volume growth and the commercial initiatives in this market. In Hong Kong, profit grew by 5% to HKD 58 million, mainly due to a one-off. Overall, EBITDA increased by 11%, with our margin edging up from 12.8% to 12.9%. Our strong first-half performance reflected the effectiveness of our strategy and also the discipline of our commercial execution.

It lays a strong foundation for the remainder of the year. We anticipate that the macroeconomic and geopolitical environment will remain complex. Elevated aluminum prices and ongoing energy volatility will continue to place pressure on raw material and logistic expenses. This has presented margin risks across the beverage industry, we have put in place a range of commercial and cost initiatives to reduce the exposure. In the Chinese mainland, our business is growing steadily, and we’re capturing category-specific growth even as broader consumer sentiment remains value-conscious. In Southeast Asia, we’re confident over the long-term growth potential. In Vietnam, affordability-led growth supported by our entry pack strategy in sparkling and portfolio expansion will help us capture further growth.

In Thailand, while the impact of sugar tests gives causes for caution, we’re encouraged by the early signs of our entrance into the energy category, and we’ll continue to expand our low and no sugar portfolio. Overall, we remain confident about the prospect of our market, while supported by our continued long-term investment, and we’ll continue to innovate and transfer operational expertise to Southeast Asia. All of this is meant for driving a better execution in the market for further growth. With that, thank you, and now I’ll hand over to Martin.

Martin Murray, Finance Director, Swire Pacific: Thank you. Aviation has performed exceptionally well and continues to do so it’s fantastic to see. As Karen mentioned, all our core businesses are investing into the long term. From a HAECO perspective, it’s exciting times on that piece. Particularly the problems I’ve had, we’re cleaning that up, and we’ve exited the U.S. side like we did in property, very much Swire Pacific focused on Greater China. We’ve got the excitement of moving the Xiamen facility that will open later this year. As the chairman mentioned, in 2028, moving facilities into Vietnam. Exciting times in terms of investment in HAECO.

The Cathay Group has a HKD 150 billion commitment that was mentioned earlier. It’s great to see Cathay growing again with Hong Kong being an aviation and financial hub, targeting to have 150 new aircraft joining the fleet over the next 10 years, targeting 150 destinations by the end of that 10-year period. The results are very strong in both HAECO and particularly Cathay, really driven by the Cathay’s strong results. In HAECO, you can see the base maintenance, line maintenance, and engine performing well. Other items coming down as we’ve exited the ITM program last year. On the Cathay Group, it really is a great story in both passenger and cargo, with strong growth in capacity, up 11.8%, strong load factors, and higher yields across the board. First quarter, very strong.

Second quarter was impacted by the Middle East and the higher oil price, but strong load factors made it a good first half overall. The outlook, again, remains good for both entities. HAECO will continue, we think, to have strong base maintenance and engine services. At the Cathay side, whilst there is still the Middle East uncertainty and a higher oil price, we expect load factors and yield to continue to be strong. With healthcare, I’ll mention this very briefly. The strategy in healthcare, as we’ve said for a while now, is patience. As we look to expand healthcare, we believe a lot of our targets are overvalued at this point in time, we’re really outbetting down the operations side. It’s great to see Delta moving in the right direction. We have a new CEO appointed to lead our healthcare business.

We’re heavily focused on our business that we own in Delta, learning more on that front. The healthcare business will remain a small part of the portfolio over the medium term. If that’ll pass back to you, Chair.

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

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

Johnny, Analyst, UBS: Thank you. This is Johnny from UBS. Concrete questions, good results. Two questions for me. Number 1, could I ask about the exchangeable bond on Cathay? I saw that today’s share price for Cathay is always past the conversion price. I guess we expect by the end of June next year, the company at Swire Pacific does not need to repay the exchangeable bond. Maybe a follow-up question regarding this one is regarding on would that be also possible to consider to issue exchangeable bond on Swire Properties? My second question is about given all the three businesses have been doing very well. It seems to me that it is now in the harvest period with falling net growing. How do you think about the CapEx and also investment in the new business or maybe existing business? Thank you.

Martin Murray, Finance Director, Swire Pacific: On the exchangeable bond, that was done in June, and as you mentioned, will expire in June next year. Time in June, it was favorable market conditions. When we were looking to do a bond like that, it was an instrument that we looked at, and the pricing is superbly attractive, helps to get the balance sheet. Cathay Pacific riding high, the Middle East crisis gives you that flexibility of what will happen in the next 12 months on that piece. We still hold 45%, and we can refinance it. It’s a really strong financial instrument that we thought, and we’re pleased with it.

Guy Bradley, Chairman, Swire Pacific: Swire Properties?

Martin Murray, Finance Director, Swire Pacific: Swire Properties, there’s been discussion on doing something like that with that. There’s opportunistic financing at the time.

Guy Bradley, Chairman, Swire Pacific: Harvest period on capital?

Martin Murray, Finance Director, Swire Pacific: Sorry, again?

Guy Bradley, Chairman, Swire Pacific: The harvest period on capital.

Martin Murray, Finance Director, Swire Pacific: Well, I think it’s right to speak for themselves in terms of the intent of the continued investment. I mean, the strategy that we have in properties is recycling. We’ve recycled over HKD 60 billion on that piece. We’re not changing strategy in any sense. We’re investing heavily across all the core divisions in that piece. We’ve got seven properties under execution, so we are very much focused on the execution and delivery phase as well. Yeah, it’s exciting times.

Guy Bradley, Chairman, Swire Pacific: Thank you. Any next questions? Yes, gentleman in the back.

Jeffrey, Analyst, CLSA: Hi, Guy. Hi, Martin. Hi, Karen. Thanks. This is Jeffrey from CLSA. My question is about the income dividend, 15% year-on-year growth here. Just trying to pick your brain on how or what factors have you considered among one, Cathay’s 30% growth in income dividend, two, maybe perhaps your outlook for the rest of the year for the entire Swire Group, and three, have you considered anything about rebalancing the split between interim and final dividend for Swire Pacific? Just trying to figure out when you think about passing through Cathay’s dividend income to your shareholders, is there any particular time frame in your mind when that will happen? Thank you.

Martin Murray, Finance Director, Swire Pacific: Yeah, look, Cathay is a great 30% story, again, your percentages of basis, right? They’re coming out of a lower base in terms of their dividend on that piece, it’s great to see them having bigger dividends. From a Swire Pacific point of view, as we said, strategic investments and progressive dividends on that bit with a strong balance sheet allows us to do that. I think the outlook remains really strong. I would expect the dividend to continue to be strong on that piece. I think the question that we’ll get asked afterwards is about share buyback, I think one of the reasons for the strength of the dividend right here with the share price going up so much, the progressive dividend is more favorable to the share buyback at this point in time.

Therefore, that’s why you’ll see the focus.

Guy Bradley, Chairman, Swire Pacific: Thank you. Any other questions? Yes, gentleman in front in the middle.

Jeffrey, Analyst, CLSA: Just two questions. One on Coca-Cola. I noticed that on the slide showing the margin improvement, that I think the ASEAN market margin had already been exceeded China, if I was correct. Maybe I was wrong, but anyhow, would you be able to share with us how you are thinking about the medium-term outlook on the margin trends for China as well as the ASEAN market? That’s the first one. The second one, I think a lot of commitments across the group on investments and with, I guess, Cathay and also Swire Properties self-funded. Now, I think, Martin, you also mentioned that the healthcare business is too pricey. Where else could you invest outside of you mentioned dividend and share buyback. Just trying to think what else you can invest in.

Karen So, Chief Executive Officer, Swire Coca-Cola: Thank you for the questions. Yes, we do have margin improvement in the first half, I do see the trend will continue. This is also the goal for our business as well, to continue to drive margin improvement across all our business through our commercial initiative, portfolio package, pricing strategy, and also through cost efficiency exercise to improve our overall organization effectiveness. Thank you.

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

All the investments are through our core businesses.

Guy Bradley, Chairman, Swire Pacific: Thank you. Any next questions? Yes, gentleman in front in the gray shirt.

Feng Chou, Analyst, Bank of America: Thank you. Feng Chou from Bank of America. I actually have 2 questions for Karen. First of all, congratulations on the mainland performance. I think it is very strong despite the very weak consumer sentiment. Can you give us more color about what strategies you are making in the mainland? Because you mentioned e-commerce, but we all know that e-commerce is nothing new. If you can talk us through more about your strategy in the mainland. Secondly, I think on the cost sensitivity to the margin, especially if oil price is trending down towards the end of this year or even next year, what kind of margin should we expect on the overall beverage side? Thank you.

Karen So, Chief Executive Officer, Swire Coca-Cola: Thank you. Yes, overall, the consumer sentiment in China still remains cautious. Yet there are lots of opportunities that we can grow our sparkling business, especially in China. One of the things that we are seeing, consumers shifting their purchase behavior from the traditional channel to e-commerce, which is online, and also to the immediate consumption channel, tourism, sports event, and those are the very strong emerging channel. We are able also to deploy lots of the smart cooler into the channel that we have not been able to capture the consumption in the past. Overall, I would have to say the very effective allocation of our resources to invest in the place, in the channel where consumers are actively shifting their consumer behavior. That helps us to capture the consumer purchase in China. Overall, the beverage category is still growing nicely in China.

On your second question on the cost pressure, we do see moving into the second half, the cost pressure will continue, especially when in the first half we are a little bit insulated by cost due to our advanced purchase. Having said that, we continue to use our commercial initiative through a better pricing, right channel to be deployed in the market to mitigate those risks, and also through our cost efficiency exercise to make sure our organization is efficient. Thank you. Thank you. Any other questions? Gentleman at the back.

Speaker 7: Hi, Karen. I promise this is my last question.

Karen So, Chief Executive Officer, Swire Coca-Cola: Hello.

Jeffrey, Analyst, CLSA: Just maybe for the sales volume in China for the first half, can you help us understand maybe perhaps the momentum between first quarter and second quarter? Do we see some deceleration in second quarter in light of what’s happening at the rest of the world, or do we see an accelerating trend as you go through the first six months of 2026? Thank you.

Karen So, Chief Executive Officer, Swire Coca-Cola: Thank you, Thomas. I think for the first quarter and second quarter, our volume both growing at a high single digit or even double digit number, which is very nice to see. This is driven by sparkling growth, which is the core driver of our growth. At the same time, packaged water also delivered huge volume growth for us. Thank you. Any more questions? Looks like everybody’s happy. Thank you very much for joining us this afternoon. That concludes our session for today. Thank you.

Guy Bradley, Chairman, Swire Pacific: Thank you.