New World Profit Drops as Developer Calls Virus ‘Ruthless’
(Bloomberg) -- New World Development Co. expects the spreading coronavirus to put heavy pressure on its business, as the property firm announced a slump in first-half earnings.
Underlying profit tumbled 27% to HK$3.9 billion ($500 million) for the six months ended Dec. 31, according to an exchange filing Friday. New World attributed the decline to the absence of any sizeable new projects. Net income was HK$1.02 billion versus HK$11.3 billion the previous corresponding period.
“The outbreak of COVID-19 led to a quick turnaround in the reviving market optimism and deepened market concerns about economic outlook,” the company said in the statement. “The virus is ruthless, and no one can predict how things will unfold. All these unknown factors and uncertainties have brought heavy pressure on various business sectors.”
Hong Kong’s largest developer, Sun Hung Kai Properties Ltd., also this week cited the coronavirus as one of the key risks to its business. The company’s first-half profit, released Thursday, slid as pro-democracy protests roiled the city last year. Sun Hung Kai expects retail and home sales to be affected by the disease.
New World Executive Vice-Chairman Adrian Cheng said the virus’s impact on the economy would be bigger than the 2003 SARS outbreak.
“There has been a huge ripple effect across all industries including tourism, retail, catering and services. These business are suffering from an unprecedented shock,” he said during a web-cast following the results announcement.
The group’s hotel operations recorded a loss due to a drop in tourist arrivals and pre-operational expenses of new hotel projects in mainland China.
“The average occupancy and room rates of the group’s hotels in Hong Kong, which are oriented toward high-end business travelers, have been affected in varying degrees,” it said. “At the Grand Hyatt Hong Kong in Wan Chai, the average occupancy rate fell to 53%.”
However, Cheng said he’s still confident in Hong Kong’s property market.
“We’re prudently optimistic about the property market. There’s still a lot of pent-up demand,” he said, adding that he expects property prices to remain stable.
New World will also continue offering rental concessions for its retail tenants in March to relieve their financial pressure, according to Cheng. The company also announced Friday that it would set up production lines through its charity foundation to produce 200,000 facial masks a day in Hong Kong to help the city’s shortage.
Stock in New World fell 0.8% Friday before the earnings announcement. Its shares have declined 6.2% since the beginning of the year versus a 7.3% drop in Hong Kong’s benchmark Hang Seng Index.
©2020 Bloomberg L.P.