Changhe (00001) Interim Results Meeting: Li Zeju Says “Be Careful to Ride the 10,000 Year Boat” Lu Fang bluntly said that there are hidden concerns about the needs of various businesses

The Zhitong Finance App learned that on August 13, Changhe (00001) announced the results for the first half of the year. Group management said at the analysts' meeting that they were cautious about the outlook for the second half of the year and responded to key issues such as capital allocation, dividends, depreciation of the Port of Panama business, and Watsons store strategy.

When asked how the Group will allocate capital and dividend or share repurchase plans, Lu Fang, Group Co-Managing Director and Group Finance Director, responded that looking ahead to the second half of the year, the operating environment is expected to remain challenging and difficult to predict. The Group anticipates that the demand situation in its various businesses remains a major concern, so it is important to continue to adopt a prudent strategy.

He further pointed out that there are two things to keep in mind: First, all earnings were only received within the past 7 months; in fact, some large profits were only received in July. Looking at the Changjiang Group as a whole, Changhe, Changjiang Infrastructure (01038), Electric Energy Industry (00006), and Changshi (01113) have all received rich profits in the amount of HK$1 billion.

Second, it reflects that the management and board of directors of the Group's companies need to carefully consider the use of these earnings, not only to measure their impact on indicators such as earnings per share (EPS), cash flow per share (CFPS), and balance sheets, but also to take into account shareholder return goals. He hoped that when companies under the Changjiang Group announce their annual results six months from now, they can provide more guidance on the outlook.

Although Chairman Li Zeju did not attend the performance meeting, Lai Kai-ming, the group's co-managing director, conveyed his views at the conference, saying that there were many uncertainties in the second half of this year, and that many things could not be understood. “Since you can't see it, you need to be more careful”, and used “be careful when driving a 10,000 year boat” to summarize the current operating strategy. Lai Kai-ming later added, “If you can't see it right, don't rush around.”

Port business EBITDA recorded HK$9.032 billion in the first half of the year, an increase of only 4% over the previous year, and overall throughput decreased by 1%. Lai Kai-ming said bluntly that port business performance declined slightly in the first half of the year. This was actually unfair. The main reason was that the two terminals in Panama were stolen, and the EBITDA of HK$496 million was lost during the period; had it not been for the illegal misappropriation of Panamanian assets, the growth would be quite impressive. Excluding the impact of the Panama Terminal, port throughput actually increased by 3% year-on-year, and the increase in EBITDA could reach 10%.

Looking ahead to port business in the second half of the year, the situation in the Middle East remains extremely unstable. Trade tensions, including the US government's re-imposition of tariffs, will continue to affect global trade; goods delivered early to cope with anticipated tariff increases will put pressure on continued freight volume growth; the Group is expected to achieve profitable growth this year with its diversified geographical business portfolio, favorable operating mix at gateway ports and transit ports, and continued focus on productivity and cost efficiency.

Regarding the termination of the Panama Terminal operation at the end of February, Changhe Financial Director Zhang Junhai made it clear that there is no need to reduce the value of this business. The Group strongly opposes the Panamanian Government's action to terminate terminal operations and will continue to actively pursue all possible domestic and international legal procedures with legal advisers to protect the Group's legitimate rights and interests. In the opinion of the Legal Counsel, it is considered that the Group has sufficient legal grounds.

As for the overall progress of port transactions, Lu Fang said that since the Group made an explanation at the annual shareholders' meeting in May, there have been no new developments to report.

In terms of retail business, Lai Kai-ming said that the decline in the number of Watsons Group stores in the first half of the year reflected the Group's prudent approach to portfolio management, but this did not mean that the long-term expansion strategy had changed. For example, in mainland China, the business continuously optimizes the store network by closing stores in locations with low customer traffic. He expects that the pace of opening stores will accelerate in the second half of the year, and that the number of stores will record growth throughout the year, while business development will continue to focus on core health and beauty businesses, and emphasized that strict capital allocation principles will continue to be used as the basis for investment decisions to create sustainable long-term returns.

Lai Kai-ming added that he is pleased to see the improvement in retail business performance in Hong Kong, mainly due to the gradual stabilization of the market, as well as the Group's measures to improve its product portfolio, enhance customer interaction, expand O+O and online businesses, and invest in store renovation plans.

Regarding views on the integration of the European telecommunications market, Lu Fang mentioned that the Group has observed that the regulatory environment for integration within the European market is becoming more relaxed, often receives different suggestions, and has been exploring and evaluating various solutions that can enhance the long-term value of its business for shareholders, and is open to further exploration of integration opportunities or other transactions within the market, but the board of directors has not yet decided on any transactions.