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Swire, the Asian conglomerate and owner of Cathay Pacific, reported a drop in profit for 2016 as retail sales in Hong Kong fell and intense competition dented demand for its airlines’ services.

Underlying profit, which adjusts for changes in valuation of investment properties, fell 69 per cent to HK$3.06bn. That was less than half a median estimate of HK$6.28bn from economists compiled by Bloomberg.

Reported net profit for 2016 dropped 28 per cent from the previous year to HK$9.64bn ($1.24bn).

Revenue for the company, which operates businesses ranging from soft drink bottling and distribution to airlines, rose to HK$62.38bn, up 2 per cent on 2015.

Swire subsidiary Cathay Pacific reported its first loss since 2008 on Wednesday as the Hong Kong carrier saw increased competition from Chinese airlines and fewer premium class passengers.

The conglomerate’s property division was its largest contributor to underlying profit during the period, holding at near-2015 levels even as gross rental income fell in Hong Kong on lower retail income from reduced retail sales in the territory.

Swire said it expects office rents to be resilient in Hong Kong but forecast demand from retailers dependent on tourist dollars in the city would remain weak.

John Slosar, Swire chairman said:

The difficult market conditions faced by some of our businesses have led them to take measures to improve efficiency, to reduce costs where possible and to focus on core operations. This should serve us well in the longer term when market conditions improve.

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