Chairman pledges to concentrate on businesses the company does best in
HONG KONG - "Conservative" and "modest" are words often mentioned by Swire Pacific Ltd Chairman Christopher Pratt when talking about business development of the Hong Kong-listed conglomerate.
"We are known to be relatively conservative and very high quality and I think that's the culture of the company," said Pratt, adding that the company's motto is "Esse quam videri" Latin for "To be, and not to seem to be". In other words, substance over style.
As an industrial group with 195 years of history, Swire Pacific Ltd is one of Hong Kong's leading listed companies, with diversified interests in five operating divisions: property, aviation, beverages, marine services and trading and industrial.
Unlike many large companies that want to be multinationals, Swire Pacific Ltd said it will focus on developing on the Chinese mainland. "I am very bullish on the future of Hong Kong and very bullish on what is happening on the mainland. Otherwise we wouldn't be investing so aggressively," said the chairman, adding that Hong Kong and the mainland are the places to be.
Currently, 90 percent of what Swire Pacific Ltd does is to invest in Hong Kong and on the mainland. "I am very happy and privileged (to be able to do that)," said Pratt.
Hong Kong businesses have been particularly active in the mainland market in recent years. According to the Ministry of Commerce, the number of newly approved Hong Kong-funded projects on the mainland increased 22.1 percent to 13,037 in 2010. The special administrative region's investment in the mainland amounted to $60.57 billion last year, a year-on-year increase of 31.5 percent.
By the end of last year, a total of 322,391 projects funded by Hong Kong businesses were operating on the mainland, with a combined investment of $456.21 billion.
However, compared with its archrivals, such as Sun Hung Kai and Jardine, Swire Pacific Ltd's expansion into the mainland was neither early nor quick.
Taking real estate - the most important sector in the group's portfolio - as an example, its first major commitment was between 2004 and 2005, but it did not commit significant capital until 2006. So far, it has five development projects with 8.5 million square feet (789,650 square meters) on the mainland, all in different states of completion.
The most recent one in Chengdu has yet to start after the company won the tender at the very end of last year. There are two others in Beijing, one in Shanghai and one in Guangzhou. They are all commercial mixed-use projects, predominantly retail with some office and hotels, but very little residential. Their completion dates vary between imminent and 2015.
"We are always looking," said Pratt, adding there was no specific plan in mind. "It depends on what comes up." The chairman indicated that the company is comfortable in the major cities. Other Hong Kong developers have already entered the second- and third-tier cities, where they see huge potential and rich land resources.
"I don't think we intend to be the biggest. We believe we've been very good at what we do," said Pratt. The company has targeted its property and real estate investment on the mainland predominantly within the retail sector. "I think it is where our greatest area of expertise is," Pratt said.
Swire Pacific Ltd is regarded in Hong Kong as the premier retail developer. It has three very highly regarded retail malls - Pacific Place, Island East and Festival Walk - in the special administrative region.
"We are trying to duplicate or replicate that model on the mainland," said Pratt. Swire's Sanlitun Village project in Beijing has shown itself to be successful and is regarded as one of the most modern and attractive business areas in the capital city.
Other divisions of the company got an earlier start on the mainland. Its beverages arm, for example, entered the mainland in 1986, and its aircraft maintenance wing started in 1993. Some of Swire's trading and industrial activities can be traced back to between 1980 and 1981, while Cathay Pacific Airways and Hong Hong Dragon Airlines Ltd, operating as Dragonair, the group's aviation division, have been flying in and out of the mainland for many years.
Swire Pacific Ltd has never tapped into new businesses, such as the Internet, clean energy or finance. "We should focus on what we feel competent at doing and where our expertise is greatest - in things including shipping, aviation and property," said Pratt.
"The culture of the group is essentially conservative, so we will not easily go out and buy a new business that does Internet stuff. It is all about corporate culture. The sort of culture you need to start Facebook or Alibaba is not something that we as a company have."
However, the company said it is fair to say that it does make use of modern technology to help its business. At Cathay Pacific Airways, for instance, all of the carrier's products have been put online, including reservations.
Swire Pacific Ltd has been devoted to organic growth. "We don't go into a particular business, grow it and then sell it on before going into something else. We tend to just invest and hold and grow," said Pratt, adding that it is one of the investment principals of the group to not get into financial services.
Pratt joined Swire in 1978 and has been in his current position for five years. "I have learned lots of things from different people. To keep things in perspective, don't lose your temper. Try to stand back and think about it overnight. Don't make snap decisions," he said.
For his staff, his advice is "Just do your best". He said: "Don't be political. Quality people will get noticed and will get pushed up and moved up. Try to keep work in perspective. Work hard but not too hard. Respect your colleagues."
Swire Pacific Ltd released its annual report earlier this month. It showed net profit increasing 75 percent to HK$38 billion ($4.9 billion) in 2010.
The 2010 results benefited from a very strong performance from Cathay Pacific and continued growth in profits from the property division. Profits also increased in the trading and industrial division. However, profits fell in the beverages and marine services divisions and were little changed at Hong Kong Aircraft Engineering Company Limited, according to Pratt.
