Li Ka-shing Group Financial Report: Deterioration of Geopolitical and Trade Situation

On Thursday, March 20th, the 2024 financial report of CK Hutchison, owned by Hong Kong billionaire Li Ka-shing, was released. The financial report indicated a significant escalation in geopolitical and trade tensions, putting heavy pressures on the global business environment. CK Hutchison’s 2024 profit was reported below expectations.

According to the report, CK Hutchison’s net profit for 2024 dropped by 27% to 17.1 billion Hong Kong dollars (2.2 billion US dollars), falling short of analysts’ expectations of 22.5 billion Hong Kong dollars. The revenue reached 476.7 billion Hong Kong dollars, showing a 3.28% year-on-year increase. The company announced a full-year dividend of 2.2 Hong Kong dollars per share, down from 2.53 Hong Kong dollars per share in the previous year.

CK Hutchison has become the focus of media attention recently. In early March, it agreed to sell several of its ports to a consortium led by US-based BlackRock, including two ports at the Panama Canal. This move reportedly angered Beijing as Xi Jinping was unhappy about not being consulted in advance, especially since Xi had planned to leverage the Panama ports in negotiations with Trump, which caught them off guard.

Chinese state media openly criticized the deal, leading to a sharp drop in CK Hutchison’s stock price.

In response, CK Hutchison stated that the transaction was purely commercial and unrelated to recent political news regarding the Panama ports.

CK Hutchison is currently under the leadership of Li Ka-shing’s son, Victor Li.

“The operating environment for the group’s businesses is expected to be volatile and unpredictable,” Victor Li stated in the financial report released on Thursday. He warned that the shift of shipping companies to new alliances and the continued geopolitical risks could potentially disrupt global supply chains by early 2025.

Victor Li mentioned that CK Hutchison will control capital expenditure and new investments, focusing on rigorous cash flow management while urging all its businesses to enhance productivity and reduce operational expenses.

“Finally, the group will maintain a strong balance sheet and liquidity position to ensure robust financial health even in the most challenging market conditions,” he concluded.

The latest financial report from CK Hutchison did not mention the sale of the port assets.

It is reported that multiple Chinese government agencies are currently investigating and reviewing the port deal of CK Hutchison.

However, Bloomberg noted that Chinese authorities are unlikely to prevent the transaction, and options for retaliating against Li Ka-shing’s vast business empire are limited.

Since this deal only involves CK Hutchison’s overseas assets, Beijing’s ability to block it is quite restricted. The group still retains all its ports in Hong Kong and mainland China, and CK Hutchison itself is registered in the Cayman Islands.

Looking at the financials, the port business is not the largest revenue contributor for CK Hutchison but rather the smallest, accounting for only 9% of the revenue, lagging behind retail, infrastructure, and telecommunications among other segments.

In recent years, CK Hutchison’s diversified global investment portfolio may help mitigate potential political influences. Currently, Hong Kong and China only represent 12% of CK Hutchison’s 2024 revenue, with the majority of assets concentrated in Europe, Canada, and Australia.

CK Hutchison announced on Tuesday, the 18th, that there will be no press conference or analyst meetings related to its performance this year. Additionally, another company under Li Ka-shing’s ownership, Cheung Kong Property, has also canceled these events.

Investors have increased their options bets on CK Hutchison to the highest level in eight years as they await more clues about the latest port deal, with the final agreement expected to be signed on April 2nd.

Reuters reported that while the Chinese government led by Xi Jinping may not have the authority to veto the transaction between CK Hutchison and BlackRock, they could exert political pressure on the Li family, akin to how they dealt with Alibaba’s founder Jack Ma in the past.

However, the broad negative repercussions of such actions could far exceed those faced by Jack Ma, especially against the backdrop of the urgent need to boost the Chinese economy. Some Chinese netizens commented that even Li Ka-shing from Hong Kong is subject to Chinese Communist Party’s jurisdiction, let alone talking about relaxing supervision over domestic private enterprises.

The article also delves into the intricacies and consequences of Li Ka-shing’s decision to sell the ports, the discussions surrounding his sale of shares in Postal Savings Bank of China, as well as the scrutiny CK Hutchison faced from the Chinese Communist Party regarding the port sale, emphasizing potential implications on Hong Kong businesses.