China Communications forecasts solid earnings increase in second half

PUBLISHED : Monday, 21 January, 2008, 12:00am
UPDATED : Monday, 21 January, 2008, 12:00am

China Communications Construction Company, a leading mainland transport infrastructure builder, said earnings in the second half of last year probably exceeded those of the first six months.

The formal annual report will not be released until March, but the company is confident the outcome will give investors something they have always wanted - a solid profit for last year and a rosy picture for years to come.

'Our numbers in the first half year are good, but I think [they] could be better for the second half because companies in the construction industry are usually busier later than earlier in the year,' said company president Meng Fengchao.

The company reported income of 58.67 billion yuan for the first half of last year, up 24.3 per cent. The net profit during the same period reached 2.74 billion yuan, a surprising 153.1 per cent increase compared with 2006.

'I think we are doing very well in our core businesses such as bridge-building and port machinery, and at the same time we see our market share of railway construction has the momentum to grow faster in the years to come.'

Most of the profit was still contributed by the traditional construction and port machinery sectors, but signs of a more balanced development are becoming clearer as the company is determined to be more aggressive in entering the railway construction market and expanding business globally.

'Road [construction] is still a big part of our business, but we have realised that there is not as much potential in the road sector as in railways,' Mr Meng said.

The mainland plans to pave about 5,000km of road this year, but most of these projects will be lower-standard highways that function as add-ins to the vast expressway networks.

But the Ministry of Railways announced in its annual work conference earlier this month that 300 billion yuan of new railways would be paved this year, with a larger amount of investment in the pipeline for 2009 to 2011.

As a newly emerged railway builder, China Communications is in position to grab a considerable share of the market, Mr Meng said.

The company was awarded a high-speed railway project from Heilongjiang to Liaoning provinces last year, priced at 20.8 billion yuan. Another recent project is a 13.7 billion yuan share of the Beijing to Shanghai high-speed railway project, which was estimated to cost 80 billion yuan to build.

'It shows the railway ministry's confidence in us,' Mr Meng said. 'Liu Zhijun (the minister of railways) told me in person that my company is the best in China in terms of technology, quality and management and we are very much encouraged by that remark.'

The company was now included in an 'inner circle' by the railway ministry and would be given priority consideration when new projects were released, Mr Meng said.

Exploration in overseas markets this year, is another area the company is keen to enter.

Rather than betting on the traditionally booming US and European Union markets, it will aggressively seek new opportunities in emerging markets in Middle Eastern and Asian countries.

A company representative visited several Middle Eastern nations last month and had reached a couple of initial agreements to build projects there, Mr Meng said

Among those projects, a port construction project in Saudi Arabia worth at least US$587 million had been inked this month, according to a Caijing magazine report.

The firm will also explore overseas markets together with major steel and financial companies.

'Steel companies are to buy natural resources overseas with loans from commercial banks and we will build road and port facilities to let them transport all those resources back to China,' Mr Meng said.

The real estate sector will be another new growth area as the company owns large parcels of lands in coastal areas that were formerly allocated for industrial use.