(Bloomberg) -- The operator of Hong Kong's famed subway system said profit dropped last year as it fell victim to the city's pro-democracy protests -- and warned the coronavirus is now putting additional pressure on earnings.
MTR Corp. said Thursday net income fell 25% to HK$11.9 billion ($1.5 billion) in the year ended Dec. 31, during which the subway frequently turned into a platform for violence and vandalism. The protests and virus probably erased HK$1.3 billion from profit in the first two months of 2020, MTR said.
“The impact of the COVID-19 outbreak on our businesses is likely to
continue for some time, but the precise timing and scale of the impact is difficult to predict and will depend on the development of the situation,” MTR said in a statement. “We have taken a number of cost control measures to mitigate the financial impact of this challenging situation.”
Hong Kong's World-Class Subway Pressured By Repeated Attacks
The network, known for its fast and reliable services, has lately suffered setbacks. Two of its subway trains collided last March during a test run of a new signaling system, resulting in two drivers being hospitalized. Months earlier, a signaling glitch on four subway lines caused chaos at stations during the morning peak-hour rush. In September, eight people were injured in a derailment, later blamed on a maintenance lapse.
MTR Train Derailment During Protests Caused by Maintenance Lapse
While MTR manages a Stockholm commuter train service and has a joint venture in the U.K. with FirstGroup Plc, it depends on Hong Kong for the bulk of its revenue. Gains from property development may cushion the company from violence-related losses, according to Bloomberg Intelligence.
MTR, established in 1975, carries 5.9 million passengers every weekday, according to its website. Shares of the company have fallen 5.7% this year.
“MTR's wounded profit growth may struggle to recover from the one-two punch of drawn-out protests and the coronavirus outbreak, especially as Hong Kong cuts train service to mainland China, and as daily commutes give way to working from home,” Denise Wong, an analyst at Bloomberg Intelligence, wrote in a report last month.
To contact the reporter on this story: Anurag Kotoky in New Delhi at akotoky@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Ville Heiskanen, Will Davies
©2020 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
