Hong Kong-based conglomerate Jardine Matheson has reported earnings of US$686 million for the FY2023 ended Dec 31, 2023, up 94% compared to FY2022.
The group’s underlying earnings, a more accurate measurement of its operational performance, was up slightly by 5% y-o-y to US$1.66 billion. At a constant exchange rate, underlying earnings were up by 7% compared to FY2022.
Revenue for the full-year period was down 4% y-o-y to US$36.05 billion, from US$37.50 in FY2022.
Jardine Matheson plans to pay a final dividend of US$1.65 per share, bringing its full-year FY2023 payout to US$2.25, up 5% over FY2022.
In Jardine Matheson’s earnings commentary, chairman Ben Keswick says it delivered a “solid performance” in FY2023, benefitting from its diversified portfolio as results exceeded pre-pandemic levels.
While challenging conditions on the Chinese mainland and in Vietnam adversely impacted Zhongsheng, Hongkong Land and THACO, Jardine Cycle and Carriage (Jardine C&C) subsidiary Astra delivered a record performance in Southeast Asia as both DFI Retail and Mandarin Oriental drove strong recoveries.
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The good
Indonesia-based conglomerate Astra’s consolidated revenue of US$20.6 billion and underlying net profit of US$2.18 billion, were 3% and 9% higher y-o-y, respectively. This earnings growth reflected improved performances from most of the group’s businesses, especially its automotive and financial services divisions.
Meanwhile, DFI Retail reported underlying profit after tax of US$155 million for the full year, a substantial improvement from the US$29 million reported in the prior year, supported by strong growth in profitability across subsidiaries and improved performance by associates.
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DFI Retail reported a non-trading loss of US$123 million, predominantly due to the goodwill impairment from its Macau food business and Giant Singapore, and foreign exchange losses associated with the divestment of its Malaysian grocery retail business. These losses were partially offset by gains from property divestments, resulting in total reported profits of US$32 million.
Meanwhile, Mandarin Oriental’s performance benefitted from consumers’ robust appetite for luxury leisure travel. The group continued to provide the exceptional levels of service for which the brand is legendary and secured record room rates. The business also continued to build occupancy, which translated into substantial improvements in revenue per available room (RevPAR) across almost all hotels.
Underlying profit increased to US$81 million in FY2023, up from US$8 million in FY2022, with underlying earnings per share at 6.41 US cents, compared with 0.6 US cents previously. The group’s non-trading losses of US$446 million primarily comprised a non-cash decrease in the valuation of the Causeway Bay site under development, resulting in a loss attributable to shareholders of US$365 million.
In addition, net debt fell to US$225 million at the end of FY2023, from US$376 million the year before. This reflected significantly higher operating cash flow from the business, net of ongoing capital investment, as well as proceeds from disposals. Gearing as a percentage of adjusted shareholders’ funds was 5%, compared to 8% at the end of FY2022.
The bad
On the other hand, Jardine Matheson received a substantially lower underlying contribution of US$139 million from its 21% interest in Zhongsheng in FY2023, compared to the reported contribution of US$263 million in FY2022.
Zhongsheng’s new car business faced a challenging market environment for new luxury vehicle sales volumes and margins during the year, due to China’s EV transition and intense auto market competition.
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Hongkong Land’s underlying performance during the year was also impacted by challenging Mainland market conditions and the resultant lower profits from its development properties, offsetting improved results from its investment properties.
Profits from the group’s investment properties increased, mainly due to an improved performance from its luxury retail and Singapore office portfolios, offsetting reduced contributions from the Hong Kong office portfolio.
Underlying profit attributable to shareholders fell by 5% y-o-y to US$734 million, while the losses for FY2023 came to US$582 million after including net non-cash losses of US$1.32 billion arising primarily from the revaluation of the group’s investment properties portfolio. This compares to earnings of US$203 million in FY2022, which included net non-cash losses of US$573 million from lower property revaluations.
Meanwhile, THACO’s contribution of US$36 million was 57% down y-o-y. This was mainly due to a significantly lower automotive profit, reflecting the slowdown of Vietnam’s economy, weakened consumer sentiment and greater competitive pressure.
Unit sales were 28% down y-o-y, with a market share decline from 23% to 21%. Losses from its agricultural operations were, however, lower than the previous year.
Keswick notes that Jardine Matheson enters 2024 facing continued market challenges in key segments in China and Vietnam, as well as lower market prices for a number of Astra’s key commodity outputs in Indonesia.
“We remain confident, however, in our long-term strategy across our core markets in Asia and will continue to focus on our strategic priorities in order to deliver growth and long-term value, benefitting from our diversified portfolio,” he says.
The ugly
Looking ahead, Keswick also emphasises the importance of sustainability for Jardine Matheson. “As a long-term business, sustainability is at the forefront of our business practices and I am pleased to say we have made significant strides in progressing our agenda. The culture within the group is fast becoming one where sustainability is seen as a business opportunity and an integral part of our day-to-day business lives.”
“Good business is sustainable business, and with our focussed approach we believe the future growth of the company will also benefit the communities in which we invest,” he adds.
On March 1, however, it was reported that Norway’s sovereign wealth fund had sold its stake in Jardine Matheson, Jardine C&C and Astra, claiming that the companies were contributing to or responsible for “severe” environmental damage with their Indonesian gold mine.
The fund made the decision following long-time warnings from environmental groups that the conglomerate’s Martabe mine threatened the habitat of the endangered Tapanuli orangutan, one of the world’s rarest great apes.
While Jardine Matheson said it was “disappointed” by the decision, it noted that the activities at the gold mine were informed by a series of orangutan habitat surveys and advice provided by “a group of highly regarded independent scientists”.
The Norwegian fund was among the largest external investors in the conglomerate, with 3.3 million shares, worth about US$135 million, according to Bloomberg data based on filings from the end of 2022.
Its stakes in Astra and Jardine Cycle & Carriage C07 were worth about US$60 million in total, according to Bloomberg.
Jardine Matheson J36 shares closed 43 US cents lower or 1.09% down at US$39.13;
Hongkong Land H78 shares closed 6 US cents lower or 1.94% down at US$3.15;
DFI Retail Group D01 closed 3 US cents lower or 1.5% down at US$2.03;
Jardine C&C C07 closed 79 cents lower or 3.18% down at $24.03;
And Mandarin Oriental M04 closed 4 US cents lower or 2.63% down at US$1.56 on March 7.
