Hutchison Whampoa Limited, Li Ka-shing's ports-to-telecoms flagship conglomerate, reported a 47 percent surge in net profit in 2010, beating market expectations driven in part by a turnaround in its 3G telecom operations.

The conglomerate also raised its full-year dividend for the first time since the company started investing in 3G business 10 years ago.

Hutchison, whose businesses include 3G network operator 3 Group and Watsons retail stores, on Tuesday reported a net profit of HK$20.04 billion for 2010, beating market forecast from HK$15 billion to HK$17.8 billion for 2010.

Hutchison declared a final dividend payment of HK$1.41 per share. Together with the interim dividend, the company paid a full year dividend of HK$1.92 per share for 2010, representing a hike of 11 percent over 2009. However, the dividend payout ratio decreased from 54 percent to 40 percent.

The company's 3G operations have finally brought a positive profit contribution to Hutchison for the first time in 10 years as the 3G segment posted an operating profit of HK$2.93 billion in 2010 compared with an operating loss of HK$8.92 billion in 2009. The turnaround was contributed by the business' organic growth, as well as the one-time benefit of HK$6.01 billion and HK$1.48 billion credited to 3 UK and 3 Italia respectively.

"With the completion of the investment phase of the 3 Group, and its positive operating profit result, the 3 Group will no longer be a drag on profits and instead it will make a positive contribution," Hutchison Chairman Li Ka-shing said on Tuesday press conference. Hutchison's 3G business had been a drag on Hutchison's overall business performance and its stock prices for much of the past decade.

"The 3 Group can rely on its own resources to develop the 4G business as the technological gap between 3G and 4G is not so great," said Li, implying that the future 4G business investment will not drag Hutchison's profit performance as the 3G investment has done in the past 10 years.

Turning to Hutchison's other business segments, Li said that "all of our existing businesses will see organic growth and I am optimistic in the short, medium and long term."

Hutchison's total operating profit jumped 9 percent to HK$46.33 billion as business segments including port and related services, retail, property and hotels, Cheung Kong Infrastructure and the 3G Group all made positive profit contributions. These increases were partially offset from the loss of contribution from the disposal of its Israeli telecommunications operations in October 2009 and decreased contributions from its finance and investment division as well as Canadian-based Husky Energy.

Li said that the conglomerate currently has no plan to spin off its 3G operations, Husky Energy's Asia business, or the local Watsons retail business at the present time. Analysts have forecast that Hutchison will eventually spin off its more established businesses.

Earlier this month however, the company spun off its container-terminal business in Hong Kong and Guangdong province through the listing of a business trust called "Hutchison Port Holding" that raised $5.5 billion in Singapore. The city-state has a far more liberal regulatory regime for business trust listings whereas it is still not permitted in Hong Kong.

Hutchison said on Tuesday that it will book a gain of approximately HK$44 billion in its 2011 results from the listing of Hutchison Port Holding.

Hopes of a turnaround in the 3G business have been lending support to the company's share price in the past year. Its shares are up about 11 percent this year, outperforming an about 0.25 percent gain in the benchmark Hang Seng Index. The stock ended down 2.09 percent at HK$88.8 ahead of the company's results announcement on Tuesday.

Reuters contributed to this story.

China Daily

(HK Edition 03/30/2011 page2)