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OUTLOOK - Cathay Pacific Airways H1 net profit seen down up to 80 pct
HONG KONG (XFN-ASIA) - Analysts' forecasts of first-half net profit of Cathay Pacific Airways Ltd range from 509 mln to 1.53 bln hkd, down as much as 80 pct from 2.58 bln hkd a year earlier.
They said the Hong Kong flag carrier's results -- due to be published on Wednesday -- will be battered by high fuel costs and a 60 mln usd price-fixing penalty levied by US authorities.
Cathay warned last month that its financial results this year--including the first half to June --would be disappointing due to the high price of jet fuel. The airline has said its fuel costs for the first half were 60 pct higher than the year before.
This was only the second profit warning Cathay has ever issued. The first came after severe acute respiratory syndrome (SARS) attacked Asia during 2003.
"We expect Cathay Pacific's interim results to demonstrate the severe headwinds that all airlines are currently facing," said Citigroup.
The US bank has by far the most pessimistic view of Cathay's performance, estimating its first half profit at 509 mln hkd, down 80 pct.
Citigroup assumes that Cathay will fully recognize in its interim results the 60 mln fine imposed by the US Department of Justice following an air cargo price-fixing probe.
Macquarie expects Cathay to report a 1.03 bln net profit, including the the US fine, down 60 pct year-on-year.
"Earnings risks remain to the downside," the Australian bank said in its second-half outlook for Cathay.
Merrill Lynch estimates that Cathay's interim net profit, including the fine, will come in at 1.20 bln hkd, down 52 pct from a year earlier.
The US house is also bearish on Cathay's second-half performance due to soaring fuel prices.
"We are of the view that the second half will likely be worse [than the first] despite being seasonally stronger," Merrill said.
It predicted the carrier will only just break even in the second half if the current 171 usd per barrel price of jet fuel holds up for the entire period.
HSBC gave the most optimistic estimate of Cathay's interim results -- a net profit of 1.53 bln hkd, down 41 pct.
The estimate assumes an average price of 150 usd per barrel for jet fuel during the first half and full recognition of the US fine.
HSBC also projects a 49 pct decline in full-year net earnings, assuming that the fuel price will stay around 150 usd per barrel through 2010.