Hutchison Port Holdings Trust (NS8U) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the conference call of Hutchison Port Holdings Trust Annual Results Announcement for the year ended 31st December 2024. Now I'll hand over to Mr. Ivor Chow, the CEO of Hutchison Port Holdings Trust. Mr. Chow, please begin.

Thank you. Good evening, everybody. And let me just say a Happy New Year of the Snake to everyone before I start. As usual, in my call, I will give a quick review as to 2024, how I see 2024 as well as the outlook for 2025. And I'll talk a little bit about the DPU trend and how I see things moving forward. And then I'll hand over to my CFO, Jimmy, to talk a little bit about the financial figures as well. So overall, if I may say 2024 has been a pretty good year for the Trust overall. I'm pretty happy with the overall results of the Trust as a whole. Obviously, if we look into the individual businesses, you see that Yantian last year had a growth of 12%. We actually exceeded total volume of 15 million for the first time in Yantian history. So that was a very good outcome for Yantian. And obviously, the U.S. trade growth was particularly strong for Yantian and in particular, the fourth quarter as well, and I'll talk a little bit more about that. So overall, Yantian, very strong growth, which leads us to the fact that we are expanding our capacity in Yantian. We do expect that the new expansion, East port expansion is on target to be rolled out in 2026. So again, Yantian has been doing quite well. On the other hand, Hong Kong volume have seen a decline of 6% year-on-year. Again, not surprising to us -- but overall, despite the volume was down in Hong Kong, from a financial perspective, actually, there has been some slow -- some growth from a profit contribution standpoint in Hong Kong despite volume being down. So -- again, I'm not overly negative about the future prospects of Hong Kong, although obviously, there are challenges. Hong Kong is going through a transition period, and we do expect volume to be challenging. But again, overall, because we are more losing out on the marginal businesses, it actually doesn't affect the bottom line all that much. And I've been saying all along, we are supplementing the lower throughput with other businesses like EVs being offloaded at the terminal, which provide margins to us as well. Overall, I think, Hong Kong, increasingly, what we're doing is integrating with our asset in Yantian, looking at the Greater Bay Area and leveraging on the growth of Yantian on Hong Kong as well because shipping lines are -- this year, in particular, having reshuffling some of the alliances, their needs are constantly changing as well. So we are watching the market carefully to see how we can turn around Hong Kong. But overall, as I said, operation remains quite strong. Our cost measures are helping bottom line, as you see in the figures later on. So overall, we have profit growth, we have attributable profit growth. So 2024 has been a good year. In terms of 2025, people ask me a lot about last year, especially in the fourth quarter, where we see a lot of front-loading of U.S. exports because of the concern about tariffs that the Trump administration may be putting in. And as we have seen in January, there were indeed additional tariffs and the market has been quite volatile. So the last quarter has been particularly busy because people are front-loading exports into that quarter. And in fact, January before Chinese New Year was quite busy as well as people kind of rushing to get their export out of Yantian. Now, whether the first quarter as a whole is going to be affected by this front-loading remains to be seen. I wish I had a better barometer of what's going on in the world. But as you can see in the first couple of weeks of the Trump administration, there has been unprecedented policy changes and whatnot. So it's very unclear at the moment how things will turn out and how quickly will some of the factories return after Chinese New Year. We're hoping it will be end of February, beginning of March, things will pick up again. But again, it remains to be seen. So a very challenging year, I would say. But overall, we do expect based on our discussion with the shipping line customers, there are some who are more optimistic. There are some who are more pessimistic. But again, for us, we look at every year at outperforming what we had last year, at least maintaining last year is our goal. I think we would hopefully see some growth out of Yantian and hopefully, Hong Kong will bottom out this year. I think the challenge, especially for the trust in 2025 is definitely on the interest front. We have been saying for quite a number of years, I think we have weathered the high interest rate environment fairly well over the last 5 years, despite interest rate rapidly rising from the low of 1% to 2% to about 5% currently, we have not had the need to do additional rights issue or capital injection to pay down the debt. We have been using our own internal cash flow to pay down almost HKD 1 billion a year over the last 5 to 10 years. That has reduced our gearing that has helped reduce some of the interest rates. But I think -- and we were hoping the interest rate would decline a bit faster. But looking at things right now, it remains to be seen, especially with tariffs being in place, how that would affect the Fed in terms of rate decline over the next 12 to 18 months. So -- as we are looking to refinance some of our debt last year as well as this year, we are definitely looking at additional interest costs, which Jimmy will talk a little bit more about later on. But with the expected increase in interest costs, our cash flow will be affected. Again, our debt moving from 1% to 2% to 5%, looking at additional cost of 3% represents a fairly significant increase in interest costs and affecting cash flow. And hence, as you see from the DPU, we are distributing HKD 0.072 per unit for the final dividend, which is obviously less than what we had last year. But the decline compared to the interim from 5.5% to 5%, our decline is a little bit lower compared to the interim just because our operating results are a little bit better. But again, from my standpoint, the trust is about stable business, stable outlook, stable DPU despite the volatility that we're seeing in the market. What we are trying to achieve is despite the interest cost increase, we try to hold the DPU level at a reasonable level so that at least investors can have an expectation of a relatively stable DPU over the next 1 or 2 years. And right now, looking at things, I'm fairly confident that we can look to kind of maintain that hopefully HKD 0.12 level for the next 12 months to 18 months, depending on the interest rate outlook. As we complete our refinancing cycle and when our nominal interest rate is more at the 5% level, we'll look at the underlying cash flow generation to see -- especially to see whether the Fed will further cut interest rate. I believe that if interest rate does decline over the next couple of quarters, we may potentially have some upside on the distribution as well. So that's the thinking on an outlook for distribution as well. I'll pause here and kind of hand over to Jimmy to talk about some of the numbers. But I can certainly circle back to talk about some of the outlook that some of you may be interested during the Q&A session. Thank you. Over to you, Jim.

Sure. Thank you, Ivor. So let me take you through the 2024 results as presented in the presentation we uploaded onto our website. If I can start on Page 9, that shows the volume for 2024. The green bar shows the volume for Hong Kong that includes our 100% owned HIT and the 2 joint ventures, COSCO-HIT and ACT. You will notice the throughput for Hong Kong for 2024 is 7.1 million TEU. That is about 6% lower compared with the year before. On the gray section of the bar chart, that's the volume for Yantian YICT and Huizhou HICT. So the combined volume at 15.2 million TEU is 12% higher than the year before. In particular, for Yantian, the throughput in 2024 achieved was a record high in Yantian's 30-year history. So the total throughput for the trust as a whole in 2024 at 22.3 million TEU is about 5% higher year-on-year. So that's the picture on throughput. If we turn to Page 11, that shows our revenue picture. In 2024, our total revenue was HKD 11.6 billion. That is 9% higher year-on-year. That is driven by the 5% increase in throughput on one hand and also an increase in average revenue per TEU, which in turn arises from a more favorable cargo mix and also an increase in storage income in Yantian. In terms of geographical split, on the right-hand side, you would notice in the pie chart that in 2024, Mainland China accounts for 79% of our total revenue, whereas Hong Kong accounts for 21%. On to the next page on Page 12, that shows our CapEx number for 2024. The total CapEx was HKD 371 million. That is 24% lower compared with 2023. Now there have been some deferrals and timing differences in CapEx spend, but most of our CapEx is maintenance in nature. And as you would probably know from our previous briefings that we try to maintain a fairly stable CapEx level of around HKD 500 million per year in the years. So on Page 13, that shows our financial position. Total consolidated debt at the end of 2024 was HKD 25.2 billion, down from HKD 25.7 billion. Now during the period in 2024, we repaid HKD 1 billion external debt; however, in 2024, we also moved about HKD 460 million off-balance sheet loan to on balance sheet that is in relation to the loan at an associated company. So the net debt reduction, the net overall -- the net reduction in total consolidated debt that you would see on this table here is HKD 540 million, that being a difference between HKD 1 billion and HKD 460 million. In terms of net attributable debt, that's at the bottom of this page, at the end of the period, we had net attributable debt of HKD 19.1 billion. On next page, on Page 14, that shows our DPU. As Ivor mentioned, the DPU for the second half is HKD 0.072. Together with the HKD 0.05 in the first half, that takes our DPU for the full year to HKD 0.122. And with reference to the market -- the closing market price on the 31st of December 2024, that would imply a yield of 9.5%. For the DPU, the record date is 18th of February, and the payment will be made on the 28th of March. Finally, on Page 15, that's our P&L for 2024. In terms of revenue, as I mentioned, the total revenue was HKD 11.6 billion. That's 9% higher than the year before. Cost of services rendered, we achieved a cost saving of about 1% despite the increase in throughput. In operating profit, HKD 4.4 billion, that is about 32% higher than the year before. Interest and other finance costs for 2024 was HKD 855 million. That is 2% lower than the year before. That is although HIBOR and SOFR in 2024 was higher than that in 2023, we benefited from the debt reduction program that we have mentioned earlier. However, going forward, as we will refinance some of our maturing debts borrowed 5 years ago, the new interest costs for those refinanced loans and debt will be higher. If you look at the borrowing rates for companies with credit ratings similar to ours and compare 5 years ago to today, you would notice the uptick in interest is around 3%. So that 3% increase in interest cost will be reflected in 2025 and 2026 as we refinance our maturing debts. Profit before tax at HKD 3.4 billion, that is 46% higher than the year before. Taxation at HKD 1.2 billion is HKD 373 million more than the year before or 44% more than a year before. The increase in taxation was a result of 2 factors. One is the increase in profit before tax. And secondly is because of the expiry of certain tax holiday in the PLC we used to enjoy. Profit after tax for 2024 was HKD 2.2 billion and profit after tax attributable to unitholders of HPH Trust for the period is HKD 615 million. And that's the -- and that sums up the management presentation that we would like to bring to your attention. So I will hand the time over to the operator. Thank you.

[Operator Instructions] Mr. Herbert Lu from Goldman Sachs.

I'm Herbert from Goldman Sachs. First, congratulations on a robust turnaround in the second half of last year. Then I have 3 questions regarding our 2024 results and our outlook for 2025. The first question is about the volume. As we just mentioned, there would be many high uncertainty for 2025. We have seen a very strong restocking cycle from Europe and U.S. in 2024, which boosts our Yantian port throughput going forward. Would we expect destocking for this year or just a normal year like 4% for the export growth? The second question is on the ASP. As Jimmy just mentioned, the ASP increased mainly driven by a favorable cargo mix. But I suppose we have not changed the contract rate. When would we do the contract negotiation for Yantian in Q1 or other quarters? If so, in Q1, given a strong volume last year, can we expect the tariff hike -- this year's negotiation? And the third question is on the cost. For 2024, we see the other operating costs decreased by around HKD 40 million. What's the main driver?

Okay. Thank you, Herbert. I'll take the first 2 questions, and then Jimmy can talk a little bit about cost. From a volume standpoint, I suppose everybody asked me the same question, what's the volume outlook? And I really do wish I have a crystal ball. And to be very, very honest, given the tariffs and Trump administration and all that is really difficult to see. In fact, I will be going to the U.S. in early March to see some of the big buyers like Amazon, Target, Walmart to get a sense of where things are. But put it that way, I mean, I met with them last year. When I met with them last year, I asked them, what's the outlook for the next couple of years? And there -- most of their answer is, okay, China is important, okay? But it is China plus many. And they're not kind of reducing their capacity in China, but they are increasingly moving the new capacity to other places like India, Thailand and whatnot. So I do not actually expect growth on a year-on-year basis to be that strong. I think 2024 was a bit of a surprise even to me, especially the growth out of the U.S. was double digit, and that is atypical. I suppose a lot of the success is due to the fact that Yantian has been very focused on developing as a hub for e-commerce, and we have seen very strong growth on the e-commerce export out of Yantian. And obviously, the warehouses right now in the U.S. are indeed quite full. And I do expect that volume will taper out in the next couple of months. The key is whether the tariff will impact inflation and whether that inflationary impact will impact consumption is something that remains to be seen. I mean, we have to watch the Fed very, very carefully. But long story short, every year, when we plan for Yantian, it's typically around the 1% to 2% growth overall. Certainly, I think 2024 was an exceptional year. And this year, it's the same. We expect the same thing. Again, for us is, hopefully, we can hold last year level and have some growth. That will be what our internal target would be. But certainly, there are a lot of uncertainty given what's happening in Canada, Mexico and elsewhere. And whether there will be further changes to Trump policy very much remains to be seen. So I hope -- I wish I can give you a better answer, but that's the best I can give at this time of the year. So that's number one. On number two, on ASP, from a pricing standpoint, as I have mentioned over the last couple of years, Yantian has always been the price leader within all of the ports in China being the most expensive one in terms of pricing. So we are watching the competitors very closely. But I suppose with last year's growth, and we are, in some sense, close to capacity. We have been seeing some pricing growth last year. As Jimmy mentioned, you didn't see as much of a pricing growth out of revenue, partly because of the renminbi depreciation. So it was offset by the renminbi depreciation. Otherwise, you would have seen a slightly higher revenue growth as well. So put it that way, we don't have a fixed renewal cycle for shipping lines. Some shipping lines have 1-year contract, some shipping lines have a bit longer contract. But every year, we try to get kind of CPI inflation increases. So it's a matter of volume growth versus overall ASP. We look at overall revenue growth to achieve our own target. So if there's no volume growth, we do expect a little bit more ASP growth because it is a volume-based business that we're doing. But if we see good volume growth, you would expect the ASP growth to be a bit less. But ultimately, we look at around the CPI level every year. And I'll let Jimmy talk a little bit about the cost savings.

Sure. Thank you, Ivor. So in terms of cost savings, we have a range of measures that we have put in place in 2024 to achieve the cost reduction that you have seen. Apart from the stringent cost control, we have -- we do have a very tight control on the headcount addition. We benefited from a drop in electricity prices during the period as well. And if you look at the changes in other operating expenses, the biggest element that is driving the factor is the rent and rates that we managed to negotiate with the government that we managed to negotiate for lower rental rates compared with the year before. So -- but all in all, I think we -- what we are trying to say is we are pushing at all fronts to make sure that our costs remain in a very tightly controlled manner.

Yes. And I would kind of add to that is what I said earlier about Hong Kong is we've been losing a lot of the marginal business from our standpoint. And we are a volume business and some of the pricing are tier base. So as we lose the fringe volume, which is kind of like at the marginal end of contribution, the mix becomes better for Hong Kong. And hence, the -- obviously, what we're trying to do is still we do not want to lose critical mass, which would affect our Hong Kong profitability. But we haven't lost critical mass yet in Hong Kong, and we have been kind of shrinking our operation in response to that loss in volume. And hence, we're still able to get some of the cost increase -- cost reduction to offset some of the volume declines. But longer term, my view is to still grow volume over time and work from there.

Next up, we'll have Mr. [ Paul Tol ] From [ HS Godi Research. ]

This is Paul from Phillip Securities, not sure who is the other gentleman. But just 3 questions for me. First would be just how much more loans need to be refinanced out of that 20-plus billion? That's my first question. The Red Sea, obviously, there's less impact on you. But just wondering, do you see vessels returning on the north -- on the Red Sea routes? My second question. My last question is, could you maybe help us understand a little bit on some of the movements that we typically see on your cash flow statement? You generate HKD 4 billion operating cash. Of course, part of it is Yantian. But at the same time, you also have loans to associates and you also pay dividends to noncontrolling interest, which I understand because you have most of the cash trapped in Yantian. But maybe could you just elaborate like is this -- will this persist, I mean the next 1, 2 years?

Sure. Thanks, Paul. I'll go ahead and answer your Red Sea question first, and I'll leave the loan and cash flow question to Jimmy. In terms of Red Sea, obviously, last year, 2024 was a fairly interesting year. If you talk to some of our customer shipping lines at the early part of 2024, they were more of the pessimistic side. It turned out 2024 was a fairly good year for shipping lines. And the reason for that partly, a lot to do with the Red Sea situation. And as a result of the Red Sea conflict, a lot of the ships has to go around the Cape of Good Hope and therefore, they had to deploy a lot more vessel in order to complete the route to Europe. And therefore, that took a lot of capacity out of the global shipping capacity because there have been more and more large vessels being rolled out the shipyards, and they are taking -- these are being rolled out cascade into the rotation. So currently, as it is, with the additional vessels going to Red Sea, the journey is longer, but it doesn't really affect the port per se. So for us, we do not see much difference. The rotation kind of remains the same. Obviously, the question then begs if the Red Sea situation does resolve, how would that affect the overall market? Again, from a port operator standpoint, I'm not particularly worried because export volume is export volume. Depending on -- it doesn't matter how many ships you use on the rotation. If I have an export volume of HKD 10 million, that's all I'm going to get. But the impact on the resolving of the rest situation is how that would affect the freight rates and the freight rates affect the shipping lines' profitability which impacts us ultimately on our pricing as well. So from that perspective, the resolving the situation -- resolving the Red Sea situation we will see an increase in tonnage of the shipping lines and how the shipping line alliances and shipping lines manage capacity will be a challenge once the Red Sea situation is resolved. But again, from a terminal operator standpoint, it doesn't affect us a whole lot at this point in time.

Thank you, Ivor. So let me address the first of the 3 questions about the refinancing. So as you pointed out, there is about HKD 25 billion debt on our balance sheet. Our debt maturity profile is quite evenly spread out, and we typically do our borrowings with 5-year either term loans or 5-year bond issuance. So at a very rough estimate, you can imagine that HKD 25 billion is spread out to be about [ 1/3 ] of that is to be -- need to be refinanced every year. So in terms of refinancing, we will have a piece of refinancing to complete pretty shortly. But for the modeling purpose, I think you can quite simply assume about 1/5 of our total debt will be refinanced -- will need to be refinanced every year. So that's on the refinancing. The second question that you have is on...

Maybe I'll supplement a little bit more. Obviously, a lot of our debt was financed about 5 years ago when the interest rates were a bit lower at 1% to 2%. I think after 2026, all of our debt will be sitting at the current interest rate level. So we still have around HKD 1 billion, HKD 1.5 billion to go to refinance until we reach the full interest cost level. So for us, from my standpoint, the challenge is trying to absorb -- using the growth to absorb some of that interest cost while maintaining DPU over the next 2 years. I think that's the challenge I have. And my goal is to kind of maintain the current level while absorbing that additional interest cost. And then beyond 2026, any rate reduction will be a positive from a DPU standpoint.

Yes. Thank you, Ivor. So on the cash flow, you pointed out there are still loans to associated company lines. So I think when we look at this, we should also look at somewhere further down the cash flow statement. There's a repayment of loans by associated company and joint ventures. So if we look at the combined figure of these 2, that will give you a feeling of any additional loan that we will put into the associated company. And this is -- go back to what I mentioned earlier in the presentation about moving certain loans at our associated company from off balance sheet to on balance sheet. So apart from the small timing difference, you would see in 2024, there is about a HKD 500 million net difference in terms of additional loan to associated company. So your second part of the question is, after this, do we expect any more of these loans to associated company? I think the major on-balance sheet, off-balance sheet actions have been completed in 2024. So going forward, there wouldn't be any significant swing in terms of additional loans to associated company. Also, you mentioned about the noncontrolling interest, dividends to noncontrolling interest. And you are absolutely right. That represents the dividend to our JV partner in Yantian. As you know, we don't own 100% in Yantian. So this represents the dividends from our Yantian business to our JV partner.

Just a very quick follow-up on the -- what is your current all-in interest cost? Did I hear correctly, you mentioned that 1-plus percent? Sorry, if I got it wrong.

No, that 1% is on the loan that is maturing. So because that particular loan was borrowed about 5 years ago when we were at the trough of the interest rate cycle. If you take all our loans together and if you just look at the P&L of our interest costs divided by our profit before tax, roughly, we are talking about 3%.

Okay. Got it. And again, another follow-up. You mentioned renminbi loans is probably not feasible because your revenues are not in renminbi. So I was just wondering, has that changed?

Yes, yes. That remains the same because in our renminbi exposure, we do have a fairly natural hedge. Our renminbi receipt is paid out in renminbi expenses. So we do have a natural operating hedge in terms of renminbi. And in terms of our debt of the HPH trust, it's basically all in either Hong Kong dollars or U.S. dollars.

And you can't take advantage of the cheaper renminbi rates, I guess, I think you mentioned just...

Yes. Well, we do look at not only renminbi, but also other currencies, including Japanese yen and euros, and we look at the all-in cost after hedging. It doesn't give us a tremendous benefit worthwhile to take on the additional exchange risk. That's why we do consider using our financing tools in U.S. dollars and Hong Kong dollars and looking at the breadth and the depth of the U.S. dollars and Hong Kong dollars currency market offers, we consider that is the most suitable refinancing tool for us.

Next, we have [ Deepak Maurya Krishna ] from HSBC.

Congratulations on good profitability in the second half and for the 2024. I had a couple of questions. Just following up on what Paul was asking about the loan to the associate company, right? Could you just help us identify what this loan transaction was for? I mean, which associate are we talking about? And what was the purpose of this transaction?

Yes, sure. Yes. This loan borrowed by an associated company of ours has been in place for some time. Now what we have done in 2024 is we moved that from an off-balance sheet status to an on-balance sheet by doing -- by letting the loan pass through one of our subsidiaries because it passes through a subsidiary, that's why it has to be consolidated into our consolidated balance sheet. And that's why you would see there is an additional loan to associated company.

But if the loan is for an associate company, what was the rationale for bringing it on to the subsidiary rather than letting the associate handle it at their end? I mean there would be some benefit to it, right? Like so I just wanted to understand what was the reason behind bringing it onto the balance sheet?

Yes. It is a request or an action that we have discussed with the banks. And this is something that -- which we think will be helpful in terms of having more clarity on our balance sheet as well. As I mentioned, this will be the last of similar arrangement. And after this, pretty much the loan to that particular associated company will be carried or will be consolidated on our balance sheet. And I think that will help also the analysis of the overall debt picture going forward.

It's basically some of the PRC bank's requirements.

Okay. Maybe a question on the DPU. Like we had great improvement in the EBITDA and with lower CapEx and interest, you did a great job in almost keeping it flat or even slightly lower. So what was the missing piece, which led to distributions being slightly lower than the last year despite improved profitability?

Okay. I think I mentioned this already. I mean, if you look at the -- as I said, Jimmy, when you talk about Paul's question about average interest rate, our average interest rate is roughly around 3%, right? And which means that there are loans that are at the 5% range, there are loans at the lower of the 2% range and average out to about 3%. And so this year -- well, last year and this year, we have 2 loans that we need to refinance from the historically 5 years ago, low interest rate around 2% to the current rate about 5%. So with that close to about USD 1 billion of debt being refinanced at a higher interest cost, you're looking at roughly around 2%, 2.5%, 3% additional interest cost, which translates to roughly on a per annual basis, around USD 20 million, USD 30 million of additional interest costs. And we factored into that as a percentage of the distribution we make every year, that actually accounts for almost 15%, 20% of our distribution. And hence, again, what I said earlier is we are forecasting an increase in interest cost that we have to finance, and we do not maintain the DPU at a level that can absorb that additional interest cost over the next 2 years. That's basically the thinking behind that.

Okay. Okay. That is helpful. So is it fair to assume that the DPU or if you can give a guidance on the DPU, you would like to hold it or you would see still further decline in '25 given the interest pressure?

Yes. I think that's a fairly fair question. And we typically do give some thoughts about what potentially could be the DPU for this year. And in my mind, and I have work with Jimmy as well, we're looking at somewhere between 11.5% to 12.5%. The reason we come up with that is, obviously, with the world where it is a little bit more volatile, volume in the U.S. remains uncertain. There's certainly going to be a downside. But however, we're also assuming that volume doesn't decline further, there could be a potential upside with interest rate cuts as well, depending on where the world is and depending on geopolitical. So we're looking at potentially hopefully holding the current level, but there's certainly some room for upside as well if interest rate does fall further. So it's going to be somewhere between 11.5% and 12.5% to straddle between what we have distributed this year. Again, it is a fairly rough estimate. I wish we know whether -- how the world is going to behave in the next 12 months with the Trump administration, but that's as much as I can see from the February into the full year of 2025.

Okay. Okay. And usually, between an interest rate cut to actually realizing it on your income statement, a quarter would be a reasonable time lag?

We have -- if you look at our loans, a certain portion of it, I think, roughly around 50%, 60% is fixed and the rest is floating. You would see immediate impact on the floating portion.

Okay. That's good. And then on the operating cost front, you had a great performance this year despite growing volumes in Yantian. So Jimmy mentioned about some of the cost initiatives and keeping a tight control on the headcount and of course, the lease rent impact. Now going into '25, do you expect to sustain these savings when volumes taper -- the growth tapers?

Yes. I know what you're saying. Put it that way, cost management is certainly on our mind every year, but it is not an infinite end. I think that the question then becomes as Yantian reach closer to capacity, which while we are going to be releasing the new expansion as well, when we are close to the capacity, costs do run a little bit higher as well. We're trying to manage that, but we'll do our best. And typically, every year, we would guide our cost increase to CPI anyway. So that's the natural cost. If we can achieve efficiency to below CPI, then we will try to achieve that. But I think fair assumption would be CPI at a minimum.

Okay. And then I have 2 last questions. One on the expansion in Yantian. Any updates on the progress there? And any further cash flow commitments to that expansion? That would be the first one. And the second one, safe to assume that the HKD 1 billion repayment continues each year until you come back until we're not doing it anymore.

On the -- I'll let Jimmy answer the other question. On the expansion front, we're continuing on target. As I said a little bit earlier, we are targeting to roll out that new expansion hopefully by the first half of next year. If you've seen some of the satellite pictures, cranes already there. Civil work is done. We're just working on finalizing more of the approvals within the government and doing the back-end cleaning up. So fairly confident that we can get it rolled out sometime next year. So that's on the expansion. In terms of capital, I think we talked about this last year as well. We have already committed all of the capital requirements for that project. So we do not -- we are not assuming that there will be additional capital injection. So what's needed is already done and the rest is financed by loan, which is also already drawn down as well. So Jimmy can talk about the rest.

Yes. So the -- your next question on the HKD 1 billion debt repayment program, we will continue with the HKD 1 billion debt repayment in 2025.

As there are no further questions, this concludes today's conference call. Thank you for your participation, and you may now disconnect.