Determined to make much-needed changes to its operations, Swire Pacific has brought in a member of its founding family to head the conglomerate.
Merlin Swire, a member of the family business’ sixth generation, will take the helm as chairman of Swire Pacific and Swire Properties in July. Swire, 44, will be the first member of the family to chair the Hong Kong blue-chip company since its listing in 1974.
He will replace John Slosar, an American who has chaired Swire Pacific for four years. He will remain chairman of the group’s struggling airline, Cathay Pacific.
The timing of putting a Swire family member in the front seat could not be more interesting, because the sprawling conglomerate must show ability to revive its past glory instead of merely sitting pretty on its assets.
Before Hong Kong’s handover to Chinese rule, Swire was a leading corporate with controlling interests in airlines, beverages (Coca-Cola), Grade A offices and luxurious apartments, the most notable example being the Frank Gehry-designed Opus Hong Kong.
Twenty years on, Swire is making the big bucks predominantly from its property business – but it is not moving fast enough to increase market share and is losing out to other local family-run developers like Sun Hung Kai Properties, CK Asset and Henderson Land.
In other words, Swire is still making decent money during the property boom but seems to be losing out to local competitors, and even some from mainland China. Swire seldom participates in land auctions, nor does it build high-yield mini-flats, and its China expansion push is late and insignificant.
And that has been reflected in the unexciting share prices of Swire and member of its group. They have significantly underperformed the overall market gain of 36% last year.
Worse still, the Swire family has for years been accumulating its stock at above HK$80, but Swire Pacific is trading at below HK$74.
Last year, Swire issued a profit warning for last year’s annual result, mainly due to a HK$1.3 billion (US$166.2 million) impairment loss by its aircraft-engineering and offshore-oil businesses, never mind the struggles at Cathay Pacific.
The home-based airline was kicked out of the Hang Seng Index after a 31-year reign as the carrier embarked on a three-year restructuring exercise that aimed at cost rationalization.
Now, it is up to the Swire family to decide where to go from here as it approaches its 150th anniversary in Hong Kong in 2020.