China Merchants Holdings International Co, the investor in ports moving about a third of the nation's containers, reported a 32 percent drop in recurring profit because of lower earnings at a cargo-box making affiliate.

Earnings in the first half fell to HK$1.61 billion ($208 million) from a restated HK$2.38 billion, the Hong Kong-based company said in a filing to the city's stock exchange on Thursday. Net income tumbled 55 percent to HK$1.76 billion after a year-earlier one-time gain.

China Merchants, like Cosco Pacific Ltd, reported a decline in profit as the European debt crisis sapped demand for containers made by a company they both have stakes in. Earnings from the company's port operations were also little changed because of slower growth in Chinese trade.

"Global economic growth for the second half of 2012 will inevitably remain daunted," China Merchants said. "China's economy is also expected to experience growth pressures when export growth slows down, investments decline and demand remains inadequate."

China Merchants' profit from ports rose 1.5 percent to HK$1.66 billion, it said. Container volumes increased 5.6 percent to 29.2 million and bulk cargos gained 1.1 percent to 162 million tons.

Shares of China Merchants dropped 4.6 percent, the most in more than a month, to HK$22.80 at close of Hong Kong trading. The Hang Seng Index constituent stock has risen 1 percent this year, compared with the benchmark's 6 percent gain.

The company also said Thursday it had agreed to buy a 50 percent stake in a container terminal in Togo as it seeks to pare its reliance on Chinese ports. China Merchants has stakes in terminal operators in cities including Shanghai, Ningbo and Qingdao.

The company is looking for more investment opportunities in ports, and is also considering projects such as an industrial park in North Korea, Chairman Fu Yuning said in Hong Kong on Thursday.

Earnings generated by the company's port-related manufacturing operations fell 55 percent to HK$574 million. Container-maker China International Marine Containers (Group) Co's profit fell 67 percent because of slower demand for boxes.

The company declared an interim dividend of 22 HK cents per share, compared with 30 HK cents a year earlier.

China Merchants in January agreed to increase its stake in group building a new terminal in Colombo, Sri Lanka. Talks were also under way on constructing a port in Vietnam. Those negotiations were halted last year because of a territorial dispute between China and Vietnam.

(HK Edition 08/31/2012 page2)