Cathay Pacific dismal result

Cathay Pacific Airways Ltd, Asia's No. 4 carrier by market value, posted a bigger-than-expected 61% drop in 2011 net profit amid high fuel costs and a slowing global economy, and warned of a more challenging year ahead.

Global economic instability had continued in the first half of this year and jet fuel prices had risen further, Cathay, Hong Kong's largest carrier, said in a statement to the Hong Kong Stock Exchange.

“As a result, 2012 is looking even more challenging than 2011 and we are therefore cautious about prospects for this year,” chairman Christopher Pratt said in the statement.

Cathay might see a softening in premium air passenger demand in the first half of 2012 before an improvement in air cargo demand in the second half, Nomura analyst Jim Wong said in a research note before the results.


An airport apron controller vehicle is pictured in front of a Cathay Pacific Boeing B747-400 Aircraft on the runway at Frankfurt’s airport. — Reuters
He expected a recovery in Cathay's premium air passenger demand in 2013.

The notoriously cyclical global airline industry faces headwinds from high fuel prices and sluggish demand, particularly in the premium segment.

Cathay rival Singapore Airlines Ltd has cut cargo capacity and asked its pilots to take non-paid leave to counter the downturn.

Cathay, the world's largest air cargo carrier, reported an annual net profit of HK$5.5bil, down from a record high of HK$14.05bil in 2010 which included HK$3bil of profit from the sales of its interests in two units.

The result came slightly below an average forecast of HK$5.82bil from 17 analysts polled by Thomson Reuters. The cost of fuel, which is Cathay's biggest single expense, rose 44% to HK$12.46bil in 2011, it said.

Air China, the country's national flag carrier and 19%-owned by Cathay, contributed 31% of Cathay's consolidated pre-tax profit in 2011.

Shares of Cathay were down 2.8% at HK$15.14 after the results. They have risen about 14% this year compared with a 17% gain in the benchmark index.

Cathay stock slid about 38% in 2011, lagging a 20% fall in the main index.

Combined passenger traffic of Cathay and its unit Dragonair grew just 2.9% last year to 27.6 million while cargo throughput dropped 8.6% to 1.65 million tonnes as demand for its key markets in China and Hong Kong slowed.

Cathay Pac Air (0296.HK)
Chinese: 國泰航空公司; Mandarin Pinyin: Guótài
Hong Kong base international airline
52 weeks high:HKD20.15
52 weeks Low:HKD11.80
Current price:HKD15.20
Financial year end:31 December 2011

Results
2011
2010
Change

Turnover
HK$ million
98,406
89,524
+9.9%

Profit attributable to owners of Cathay Pacific
HK$ million
5,501
14,048
-60.8%

Earnings per share
HK cents
139.8
357.1
-60.9%

Dividend per share
HK$
0.52
1.11
-53.2%

Laos stock market has good future prospect

The Lao government didn't just have an eye on business profit, it also wanted to create a new tool to mobilise investment capital by opening the securities exchange, said a top stock market official.

Lao Securities Exchange Chairman and CEO Dethphouvang Moularat made the comment on Monday in response to public concerns about whether setting up the stock market had been a worthwhile investment. Only two companies have listed on the market and the trading value is very low.

The stock market's main income comes from the provision of transaction services for stock traders and the lease of offices. The low trading value has caused the public to wonder whether the several million dollars that went into the venture have been well spent.

Dethphouvang admitted that the Lao-Korean joint venture did not make a profit in its first year of business. But he said this was of no concern because the main purpose of the stock market was to make a profit in the long term, not in the short term.

The stock market expected to make a profit within the next 10 years or sooner if business boomed, he said, adding that ETL, Lao-Indochina Group and Lao World Group are expected to list this year.

A number of companies have expressed interest in listing on the stock market to mobilise investment capital but Dethphouvang was unable to give their names because they have not yet submitted an official request.

The participation of more companies in the stock market would encourage more people to buy shares, which would enable the market to make a profit sooner rather than later, he said.

The main purpose of the stock market was to give businesses another source of capital for growth, which in turn would help the government to create more jobs for Lao people.

As nearly every other country has a stock market, it was impossible for Laos to avoid doing likewise as it seeks to become internationally integrated.

Dethphouvang said the stock market had benefited Laos because in the past businesses could only obtain investment capital from banks, which could offer only short term assistance.

The stock market had an important role to play in helping the government to source investment capital for continued high GDP growth.

Laos needs US$15 billion over the next five years to secure annual GDP growth of at least eight per cent, of which 50 to 60 per cent will come from private investment.

Dethphouvang said the government had a number of measures in place to buffer the country against international stock market turbulence. These included limiting the rights of foreigners to own shares on the Lao stock market, which would prevent the rapid inflow and outflow of foreign reserves.

There are also measures to prevent investors from taking ownership of companies through the stock market. Many other countries allow investors to buy shares that give them ownership of a company.