Q2 2026 Swire Pacific Ltd Earnings Call - Q&A
Speaker #1: Thank you, Nico.
Guy Bradley: Thank you, Nico.
Guy Bradley: Thank you, Nico.
[Analyst] (UBS): Thank you. This is John from UBS. Congrats on the good results. Two questions from me. Number one, could I ask about the exchangeable bond on Cathay? I saw that today's share price for Cathay, it always surpassed the conversion price, I guess you expect by the end of June next year, the company, Swire Pacific, does not need to repay the exchangeable bond. Also maybe a follow-up question regarding this one is regarding on would that be also possible to consider to issue exchangeable bond on Swire Properties? My second question is about, given all the fee business has been doing very well, it seems to me that it is now in the harvest period, with falling net gearing. How do you think about the CapEx and also your investment in a new business or maybe existing business? Thank you.
[Analyst] (UBS): Thank you. This is John from UBS. Congrats on the good results. Two questions from me. Number one, could I ask about the exchangeable bond on Cathay? I saw that today's share price for Cathay, it always surpassed the conversion price, I guess you expect by the end of June next year, the company, Swire Pacific, does not need to repay the exchangeable bond. Also maybe a follow-up question regarding this one is regarding on would that be also possible to consider to issue exchangeable bond on Swire Properties? My second question is about, given all the fee business has been doing very well, it seems to me that it is now in the harvest period, with falling net gearing. How do you think about the CapEx and also your investment in a new business or maybe existing business? Thank you.
Speaker #2: thank you—this joining from UBS, congrats on the good result. Two questions from me: number one, could I ask about the exchangeable bond on CAFE?
Speaker #2: So I— I saw that today's share price for CAFE is always surpass the conversion price, so I guess we'll expect by the end of June next year the company— I mean, SWIRE PACIFIC— does not need to repay the exchangeable bond.
Speaker #2: And also, maybe a follow-up question regarding this one is regarding: would that be also possible to consider to issue exchangeable bond on SWIRE properties?
Speaker #2: My second question is about, given all the three businesses that have been doing very well, so it seems to me that— to me that it is now in the harvest period, with falling net gearing, so how do we think about the capex, and also investment in the new business, or maybe existing business?
Speaker #2: Thank you.
Speaker #1: Yeah, look, on the exchangeable
Martin Murray: Yeah. Look, on the exchangeable bond, that was done in June, as you mentioned, will expire in June next year. Time in June, it was favorable market conditions. When we were looking to do a bond like that, it was an instrument that we looked at the pricing is superbly attractive, helps to get the balance sheet. Cathay Pacific riding high, the Middle East crisis gives you that flexibility for what will happen in the next 12 months on that piece. Again, we still own 45% and we can refinance it. It's a really strong financial instrument that we got. I'm pleased with it.
Martin Murray: Yeah. Look, on the exchangeable bond, that was done in June, as you mentioned, will expire in June next year. Time in June, it was favorable market conditions. When we were looking to do a bond like that, it was an instrument that we looked at the pricing is superbly attractive, helps to get the balance sheet. Cathay Pacific riding high, the Middle East crisis gives you that flexibility for what will happen in the next 12 months on that piece. Again, we still own 45% and we can refinance it. It's a really strong financial instrument that we got. I'm pleased with it.
Speaker #3: bond, that was done in June, and as you mentioned, we'll expire in June next year. Time in June, it was favorable market conditions. You know, when we're looking to do a bond like that, it was an instrument that we looked at, and the pricing is superbly attractive, helps to get the balance sheet.
Speaker #3: Cathay Pacific, riding high, but the Middle East crisis gives you that flexibility for what will happen in the next 12 months on that piece.
Speaker #3: But again, we still hold 45%, and we can refinance it. So it's a really strong financial instrument that we thought, and we're pleased with it.
Guy Bradley: Swire Properties.
Guy Bradley: Swire Properties.
Speaker #3: SWIRE properties, no, there's no— there's been discussion on doing something like that with that. It's an opportunistic financing at the time.
Martin Murray: Swire Properties, no. There's been discussion on doing something like that with that. It was opportunistic financing at the time.
Martin Murray: Swire Properties, no. There's been discussion on doing something like that with that. It was opportunistic financing at the time.
Speaker #2: Harvest period on capital? The harvest period on capital.
Guy Bradley: Harvest period on capital.
Guy Bradley: Harvest period on capital.
Guy Bradley: Sorry, again?
Guy Bradley: Sorry, again?
Guy Bradley: The harvest period on capital.
Guy Bradley: The harvest period on capital.
Speaker #3: And what I think— I think it's— I think the slides speak for themselves in terms of the intent of the continued investment. I mean, the strategy that we have in properties is recycling.
Martin Murray: I think the slides speak for themselves in terms of the intent of the continued investment. The strategy that we have in properties is recycling. We've recycled over HKD 60 billion on that piece. We're not changing strategy in any sense. We're investing heavily across all the core divisions in that piece. We've got seven properties under execution. We have very much focused on the execution and delivery phase as well. Yeah, it's exciting times.
Martin Murray: I think the slides speak for themselves in terms of the intent of the continued investment. The strategy that we have in properties is recycling. We've recycled over HKD 60 billion on that piece. We're not changing strategy in any sense. We're investing heavily across all the core divisions in that piece. We've got seven properties under execution. We have very much focused on the execution and delivery phase as well. Yeah, it's exciting times.
Speaker #3: We've recycled over 60 billion on that piece, so we're not changing strategy. In any sense, we're investing heavily across all the core divisions, and that piece— we've got 7 properties in the— under execution, so we have very much focused on the execution and delivery phase.
Speaker #3: As well, but yeah, it's exciting times.
Speaker #1: Thank you. Any next questions? Yes, gentlemen in the back?
Guy Bradley: Thank you. Any next questions? Yes, gentleman in the back.
Guy Bradley: Thank you. Any next questions? Yes, gentleman in the back.
Speaker #4: Hi, Guy. Hi, Martin. Hi, Karen. Thanks. This is Geoffrey from CLSA. So my question is about the interim dividend, 15% YOY growth here. So just trying to pick your brain on how— or what factors have you considered among one CAFE's 30% growth in interim dividend, two, maybe perhaps your outlook for the rest of the year for the entire SWIRE group, and three, have you considered anything about rebalancing the split between interim and final dividend for SWIRE PACIFIC?
[Analyst] (CLSA): Hi, Guy. Hi, Martin. Hi, Karen. Thanks. This is Jeffrey from CLSA. My question is about the interim dividend 15% Y-o-Y growth here. Just trying to pick your brain on how or what factors have you considered around, one, Cathay's 30% growth in interim dividend. Two, maybe, perhaps your outlook for the rest of the year for the entire Swire group. Three, have you considered anything about rebalancing the split between interim and final dividend for Swire Pacific? Just trying to figure out when you think about passing through Cathay's dividend income to your shareholders, is there any particular timeframe that in your mind when that will happen? Thank you.
[Analyst] (CLSA): Hi, Guy. Hi, Martin. Hi, Karen. Thanks. This is Jeffrey from CLSA. My question is about the interim dividend 15% Y-o-Y growth here. Just trying to pick your brain on how or what factors have you considered around, one, Cathay's 30% growth in interim dividend. Two, maybe, perhaps your outlook for the rest of the year for the entire Swire group. Three, have you considered anything about rebalancing the split between interim and final dividend for Swire Pacific? Just trying to figure out when you think about passing through Cathay's dividend income to your shareholders, is there any particular timeframe that in your mind when that will happen? Thank you.
Speaker #4: So just trying to figure out, when you think about passing through CAFE's dividend income to your shareholders, is there any particular timeframe that, in your mind, when that will happen?
Speaker #4: Thank you.
Speaker #3: Yeah, look, the CAFE is a great 30% story, but again, your percentages of basis, right? So they're coming out of a lower base in terms of their dividend on that piece, so it's great to see them having bigger dividends.
Martin Murray: Yeah. Look, the Cathay is a great 30% story, again, your percentage is off bases, right? They're coming out of a low base in terms of their dividend on that piece. It's great to see them having a bigger dividend. From a Swire Pacific point of view, as we said, strategic investments then progressive dividend on that bit with a strong balance sheet allows us to do that. I think the outlook remains really strong. I would expect the dividend to continue to be strong in that piece. I think the question that will get asked afterwards is about a share buyback. I think one of the reasons for the strength of the dividend around here, with the share price gone up so much, the progressive dividend is more favorable to the share buyback at this point in time.
Martin Murray: Yeah. Look, the Cathay is a great 30% story, again, your percentage is off bases, right? They're coming out of a low base in terms of their dividend on that piece. It's great to see them having a bigger dividend. From a Swire Pacific point of view, as we said, strategic investments then progressive dividend on that bit with a strong balance sheet allows us to do that. I think the outlook remains really strong. I would expect the dividend to continue to be strong in that piece. I think the question that will get asked afterwards is about a share buyback. I think one of the reasons for the strength of the dividend around here, with the share price gone up so much, the progressive dividend is more favorable to the share buyback at this point in time.
Speaker #3: From a SWIRE PACIFIC point of view, as we said, strategic investments then progressive dividend on that, with a strong balance sheet, allows us to— allows us to do that.
Speaker #3: So I think the outlook remains really strong. I would expect the dividend to continue to be strong in that piece. I think the question that we'll get asked afterwards is about share buyback, and I think one of the reasons for the strength of the dividend around here with the share price going up so much, then the progressive dividend is more favorable to share buyback at this point in time.
Speaker #3: And so therefore, that's why you'll see it at the focus.
Martin Murray: Therefore, that's why you'll see it, the focus.
Martin Murray: Therefore, that's why you'll see it, the focus.
Speaker #1: Thank you. Any other questions? Yes, gentlemen in front, in the middle?
Guy Bradley: Thank you. Any other questions? Yes, gentleman in front, in the middle.
Guy Bradley: Thank you. Any other questions? Yes, gentleman in front, in the middle.
Speaker #2: Just two questions. One on Coca-Cola. I noticed that on the slide, showing the margin improvement, and that I think the ASEAN market margin had already been exceeded China, if I— I was correct.
[Analyst]: Just two questions. One on Coca-Cola. I noticed that on the slide showing the margin improvement and that I think the ASEAN market margin had already been exceeded China, if I was correct. Maybe I was wrong, but anyhow, would you be able to share with us how you are thinking about the medium-term outlook on the margin trends for China as well as the ASEAN market? That's the first one. The second one, I think a lot of commitments across the group on investments and with, I guess, Cathay and also Swire Properties self-funded. Now, I think, Martin, you also mentioned that the healthcare business is too pricey. Where else could you invest outside of, you mentioned dividend and share buyback. Just trying to think what else you can invest in.
[Analyst]: Just two questions. One on Coca-Cola. I noticed that on the slide showing the margin improvement and that I think the ASEAN market margin had already been exceeded China, if I was correct. Maybe I was wrong, but anyhow, would you be able to share with us how you are thinking about the medium-term outlook on the margin trends for China as well as the ASEAN market? That's the first one. The second one, I think a lot of commitments across the group on investments and with, I guess, Cathay and also Swire Properties self-funded. Now, I think, Martin, you also mentioned that the healthcare business is too pricey. Where else could you invest outside of, you mentioned dividend and share buyback. Just trying to think what else you can invest in.
Speaker #2: Maybe I was wrong, but anyhow. Would you be able to share with us, you know, how you are thinking about the medium-term outlook on the margin trends for China as well as the ASEAN market?
Speaker #2: That's the first one. The second one, I think a lot of commitments across the group on investments, and with, I guess, CAFE and also SWIRE property self-funded, and now I think Martin, you also mentioned that the healthcare business is too pricey.
Speaker #2: Where else could you invest outside of— you mentioned dividend and share buyback, just trying to think what else you can invest in.
Speaker #1: Thank you for— thank you for the question. Yes, we do have margin improvement in the first half, and I do see the trend will continue, and this is also the goal for our business as well, to continue to drive margin improvement across all our businesses through our commercial initiative, portfolio package pricing strategy, and also through cost efficiency exercise, to improve our overall organization effectiveness.
Karen So: Thank you for the question. Yes, we do have margin improvement in the H1, and I do see the trend will continue, and this is also the goal for our business as well, to continue to drive margin improvement across all our business through our commercial initiative, portfolio, package, pricing strategy, and also through cost efficiency exercise to improve our overall organization effectiveness. Thank you.
Karen So: Thank you for the question. Yes, we do have margin improvement in the H1, and I do see the trend will continue, and this is also the goal for our business as well, to continue to drive margin improvement across all our business through our commercial initiative, portfolio, package, pricing strategy, and also through cost efficiency exercise to improve our overall organization effectiveness. Thank you.
Speaker #1: Thank you.
Speaker #3: Yeah, I mean, there's no change in the strategy in terms of the capital commitments. We still are executing across all the businesses, so property still has a big pipeline on that front, and we've been clear on the capital expenditure on that piece.
Martin Murray: Yeah, there's no change in the strategy in terms of the capital commitments. We're still executing across all the businesses. Property still has a big pipeline on that front, and we've been clear on the capital expenditure on that piece. There's no change. The healthcare is always a small part of the portfolio at this point as well. There's no change in strategy. The balance sheet is marginally improved on that bit. It's still up at that 19% gearing on that piece. It just gives us flexibility in terms of what we can do and continue to do progressive dividends and do things. I think we're in good shape in that point in time. We're not looking for steady new segments, but we're not going to see something out of right field that's not in our core businesses.
Martin Murray: Yeah, there's no change in the strategy in terms of the capital commitments. We're still executing across all the businesses. Property still has a big pipeline on that front, and we've been clear on the capital expenditure on that piece. There's no change. The healthcare is always a small part of the portfolio at this point as well. There's no change in strategy. The balance sheet is marginally improved on that bit. It's still up at that 19% gearing on that piece. It just gives us flexibility in terms of what we can do and continue to do progressive dividends and do things. I think we're in good shape in that point in time. We're not looking for steady new segments, but we're not going to see something out of right field that's not in our core businesses.
Speaker #3: There's no change. The healthcare is always a small part of the portfolio at this point as well, so there's no change in that strategy.
Speaker #3: The balance sheet is marginally improved on that bit. It's still up at that 19% gearing on that piece. So it just gives us flexibility in terms of what we can do and continue to do progressive dividends and things.
Speaker #3: So I think we're in good shape in that point in time. We're not looking for a new steady new segment, but we're not going to see something out of right fields that's not in our core businesses.
Speaker #3: So all the investments are through our core businesses.
Martin Murray: All the investments are through the core businesses.
Martin Murray: All the investments are through the core businesses.
Speaker #1: Thank you. Any next questions? Yes, gentlemen in front, in the gray shirt?
Guy Bradley: Thank you. Any next questions? Yes, gentleman in front in the gray shirt.
Guy Bradley: Thank you. Any next questions? Yes, gentleman in front in the gray shirt.
Fan Chou: Thank you. Fan Chou from Bank of America. I actually have two questions for Karen. I think, first of all, congratulations on the mainland performance. I think it's very strong despite the very weak consumer sentiment. Can you give us more color about what strategies you are making in the mainland? Because you mentioned e-commerce, but we all know that e-commerce is nothing new. If you can talk us through more about your strategy in the mainland. Secondly, I think on the cost sensitivity to the margin, especially if oil price is trending down towards the end of this year or even next year, what kind of margin should we expect on the overall beverage side? Thank you.
Fan Chou: Thank you. Fan Chou from Bank of America. I actually have two questions for Karen. I think, first of all, congratulations on the mainland performance. I think it's very strong despite the very weak consumer sentiment. Can you give us more color about what strategies you are making in the mainland? Because you mentioned e-commerce, but we all know that e-commerce is nothing new. If you can talk us through more about your strategy in the mainland. Secondly, I think on the cost sensitivity to the margin, especially if oil price is trending down towards the end of this year or even next year, what kind of margin should we expect on the overall beverage side? Thank you.
Speaker #2: Thank you. Fenchow from Bank of America. I actually have two questions for Karen, I think. First of all, congratulations on the mainland performance I think is very strong despite the very weak consumer sentiment.
Speaker #2: So can you give us more color about what strategies you are making in the mainland? Because you mentioned e-commerce, but we all know that e-commerce is nothing new.
Speaker #2: So if you can talk us through about more about your strategy in the mainland. And secondly, I think on the cost sensitivity to the margin, especially if oil price is trending down towards the end of this year or even next year, what kind of margin should we expect on the overall brokerage side?
Speaker #2: Thank you.
Speaker #1: Thank you. Yes, overall the consumer sentiment in China still remains cautious. Yet there are lots of opportunities that we can grow our sparkling business, especially in China.
Karen So: Thank you. Yes, overall, the consumer sentiment in China still remains cautious. Yet there are lots of opportunities that we can grow our sparkling business, especially in China. One of the things that we're seeing consumers shifting their purchase behavior from the traditional channel to e-commerce, which is online, and also to the immediate consumption channel, tourism, sports events, and those are the very strong emerging channel. We're able also deploy lots of smart coolers into the channel that we have not been able to capture the consumption in the past. Overall, I would have to say, the very effective allocation of our resources to invest in the place, in the channel where the consumers are actively shifting their consumer behavior, that helps us to capture the consumer purchase in China. Overall, the beverage category is still growing nicely in China.
Karen So: Thank you. Yes, overall, the consumer sentiment in China still remains cautious. Yet there are lots of opportunities that we can grow our sparkling business, especially in China. One of the things that we're seeing consumers shifting their purchase behavior from the traditional channel to e-commerce, which is online, and also to the immediate consumption channel, tourism, sports events, and those are the very strong emerging channel. We're able also deploy lots of smart coolers into the channel that we have not been able to capture the consumption in the past. Overall, I would have to say, the very effective allocation of our resources to invest in the place, in the channel where the consumers are actively shifting their consumer behavior, that helps us to capture the consumer purchase in China. Overall, the beverage category is still growing nicely in China.
Speaker #1: So one of the things that we're seeing consumers shifting their purchase behavior from the traditional channel to e-commerce, which is online, and also to the immediate consumption channel, tourism, sports event, and those are the very strong emerging channels.
Speaker #1: And we're able also to deploy lots of the smart coolers into the channel that we have not been able to capture the consumption in the past.
Speaker #1: So overall, I will have to say the very effective allocation of our resources to invest in the place, in the channel where the consumers are actively shifting their consumer behavior, that helps us to capture the consumer purchase in China.
Speaker #1: And overall, the brokerage category is still growing nicely in China. So on your second question on the cost pressure, we do see moving into the second half, the cost pressure will continue.
Karen So: On your second question on the cost pressure. We do see, moving into H2, the cost pressure will continue, especially when in H1 we are a little bit insulated by cost due to our advanced purchase. In H2, we're having more pressure. Having said that, we continue to use our commercial initiative through a better pricing, right channel, to be deployed in the market to mitigate those risks, and also through our cost efficiency exercise to make sure our organization is efficient. Thank you.
Karen So: On your second question on the cost pressure. We do see, moving into H2, the cost pressure will continue, especially when in H1 we are a little bit insulated by cost due to our advanced purchase. In H2, we're having more pressure. Having said that, we continue to use our commercial initiative through a better pricing, right channel, to be deployed in the market to mitigate those risks, and also through our cost efficiency exercise to make sure our organization is efficient. Thank you.
Speaker #1: Especially when in the first half we were a little bit insulated by cost due to our advanced purchase, but in the second half we're having more pressure.
Speaker #1: But having said that, we continue to use our commercial initiative through a better pricing right channel to be deployed in the market to mitigate those risks.
Speaker #1: And also through our cost efficiency exercise to make sure our organization is efficient. Thank you. Thank you. Any other questions? Gentlemen at the back?
Guy Bradley: Thank you. Any other questions? Gentleman at the back.
Guy Bradley: Thank you. Any other questions? Gentleman at the back.
Speaker #2: Hi, hi, Karen. Promise this is my last question.
[Analyst]: Hi, Karen. Promise this is my last question.
[Analyst]: Hi, Karen. Promise this is my last question.
Speaker #1: Hello.
Karen So: Hello.
Karen So: Hello.
Speaker #2: Just maybe for the sales volume in China for the first half, can you help us understand maybe perhaps the momentum between first quarter and second quarter?
[Analyst]: Just maybe for the sales volume in China for H1, can you help us understand maybe perhaps the momentum between Q1 and Q2? Do we see some deceleration in Q2 in light of what's happening at the rest of the world, or do we see an accelerating trend as you go through H1 2026? Thank you.
[Analyst]: Just maybe for the sales volume in China for H1, can you help us understand maybe perhaps the momentum between Q1 and Q2? Do we see some deceleration in Q2 in light of what's happening at the rest of the world, or do we see an accelerating trend as you go through H1 2026? Thank you.
Speaker #2: Do we see some deceleration in second quarter in light of what's happening at the rest of the world, or do we see accelerating trend as you go through the first six months of 2026?
Speaker #2: Thank you.
Speaker #1: Thank you so much. No, I think for the first half, for the first quarter and second quarter, our volume both growing at a high single digit or even double digit number.
Karen So: Thank you, Thomas. I think for Q1 and Q2, our volume both growing at a high single-digit or even double-digit number. Which is very nice to see. This is driven by sparkling growth, which is the core driver of our growth. At the same time, packaged water also deliver a huge volume growth for us. Thank you.
Karen So: Thank you, Thomas. I think for Q1 and Q2, our volume both growing at a high single-digit or even double-digit number. Which is very nice to see. This is driven by sparkling growth, which is the core driver of our growth. At the same time, packaged water also deliver a huge volume growth for us. Thank you.
Speaker #1: So which is very nice to see. And this is driven by sparkling growth, which is the core driver of our growth. At the same time, packaged water also delivered a huge volume growth for us.
Speaker #1: Thank you. Any more questions? Looks like everybody's happy. So thank you very much for joining us this afternoon. That concludes our session for today.
Guy Bradley: Any more questions? Looks like everybody's happy. Thank you very much for joining us this afternoon. That concludes our session for today. Thank you.
Guy Bradley: Any more questions? Looks like everybody's happy. Thank you very much for joining us this afternoon. That concludes our session for today. Thank you.
