* Hutchison H2 net quadrupled, full-year down 42 pct
* sees 3G breakeven, Husky profit falling sharply in 2009
* cautious on '09, but will still buy ports in good locations
* Cheung Kong H2 falls as investment/finance income weak (Wraps Hutchison, Cheung Kong results, adds details)
By Alison Leung and Donny Kwok
HONG KONG, March 26 (Reuters) - Billionaire Li Ka-shing's twin flagships, Cheung Kong (Holdings) and Hutchison Whampoa, posted mixed half-year earnings and said they face "the most challenging environment in recent times".
But both will continue to invest in their core areas -- land for property development for Cheung Kong and ports in good locations for Hutchison, if prices are right, said Chairman Li, ranked as Hong Kong's wealthiest man by Forbes Magazine.
"In 2009, the group is facing the most challenging environment in recent times, with growth slowing in most markets and many of the world's major economies in recession," Li said.
"In the current global economic environment, the group is focused on maintaining strict operational and financial discipline to successfully execute its business strategy."
Reflecting that caution, Hutchison said its 2009 capital spending will be lower than the HK$28.7 billion it spent in 2008.
Shares of Hutchison rose as much as 6.6 percent after it said its second-half earnings nearly quadrupled to HK$6.97 billion ($899.4 million), beating an average forecast of HK$5 billion. They closed at HK$42.55, up 3.3 percent.
That also lifted shares of Cheung Kong, which missed analysts forecasts to post a 62 percent fall in second-half earnings to HK$3.5 billion. The stock rose 3.4 percent to a high of HK$72.45 before closing up 1.9 percent.
"(Both) results gave no big surprise to the market, which has already digested the impact from its 3G business," said Conita Hung, head of equity research of Delta Asia Financial, referring to Hutchison's widely watched next-generation mobile service.
3G RESTRUCTURE?
Hutchison trimmed losses at its high-speed mobile phone (3G) operations last year but missed a target of operational breakeven in individual months in the second half, which triggered speculation it may restructure its 3G business in Europe.
Hutchison merged its 3G business in Australia with global mobile company Vodafone earlier this year to create synergy and weather competition.
"The company may copy its Australian deal with Vodafone in Italy or the U.K. as they are still loss making in these markets," said an analyst, who declined to be named.
In written comments discussing the results, Li reiterated that barring any significant developments, Hutchison expects its 3 Group to achieve full-year breakeven EBIT in 2009.
The company said its capital spending for 3G will be "well below" HK$10 billion this year, versus HK$12.7 billion in 2008.
Hutchison has 20.7 million 3G customers, up 17 percent.
But its energy unit Husky Energy reported a 79 percent profit drop in the fourth quarter on sliding oil prices, and growth in many of its major areas of operations slowed in the second half as the financial crisis hit demand for housing and Asian goods.
Even though oil prices are two-thirds below highs hit in 2008, Husky is expected to continue to be profitable in 2009, although its contribution to group earnings will be "materially lower" than 2008, Li said.
Lower investment and finance income dragged down Cheung Kong's profit in 2008 and analysts were concerned its property margin would be squeezed by the current weak market environment.
Hong Kong residential property prices, which have already fallen 15 percent from a peak earlier last year, are expected to drop by a fifth this year as a rising jobless rate erodes home affordability, according to a Reuters poll in November.
Cheung Kong, which owns a near-50 percent stake in Hutchison, posted a 44 percent drop in full-year profit to HK$15.5 billion.
Hutchison recorded full-year underlying profit of HK$9.34 billion, jumping from a 2007 profit of HK$1.8 billion, as it cut 3G losses by 39 percent to HK$10.86 billion.
Full-year net profit fell 42 percent to HK$17.66 billion against HK$30.6 billion in 2007, when it booked a HK$36 billion gain from the Vodafone deal in India.
Cheung Kong shares have slipped 2.6 percent so far this year while Hutchison's are up 9.5 percent, compared with a 2 percent drop in the blue-chip Hang Seng Index. (Editing by Doug Young & Ian Geoghegan)