New World posts HK$992m loss as property sales plunge
New World Development reported an interim loss of HK$992.2 million yesterday, its first since 2004, and said it expected Hong Kong home prices to drop up to 10 per cent this year if the economic downturn persisted.
The developer, which issued a profit warning last week, said the loss was mainly because of a HK$2.35 billion revaluation deficit on investment properties and a HK$330 million impairment provision on available-for-sale financial assets.
It had posted a HK$5.65 billion net profit in the first half of 2007.
Excluding the revaluation deficit on investment properties, its underlying profit dropped 41.27 per cent to HK$1.02 billion for the six months to December as a result of a fall of 75.47 per cent in property sales.
It registered HK$276.3 million worth of property sales in the half-year period, compared with HK$1.12 billion a year earlier.
To boost sales, managing director Henry Cheng Kar-shun said the developer would offer 1,200 units in four projects for sale this year.
Mr Cheng said although home prices would be affected by the overall economy, a significant fall was unlikely because of strong demand and tight supply.
'Prices will only fall within 10 per cent even though the economy continues to slow,' he said.
'Supply will remain low as there has been no land sale from the government so far. Home seekers will enter the market once they regain confidence when the economy improves.'
Mr Cheng said the developer had paid HK$4 billion government land premium for two projects - Lung Tin Tsuen project in Yuen Long and Che Kung Temple project in Sha Tin.
New World was now in talks with the government for the land-use conversion of 6.8 million square feet of agricultural land, he said.
Group chief financial officer Alex Chow said the HK$330 million provision was mainly set aside for the lower value of its share holdings in Solargiga Energy, Citic Resources Holdings and Xinjiang Xinxin Mining Industry.
Mr Cheng said the company's earnings would be volatile this year as the property market slump would adversely affect the revaluation of its investment portfolio.
Turnover dropped 7.55 per cent to HK$12.07 billion for the six months to December.
The company proposed to halve interim dividend to 9 HK cents.
'Our dividend payout policy will become more conservative,' Mr Cheng said.
Billy Ng, a property analyst at JP Morgan, said the underlying interim profit was below his expectation of HK$1.1 billion. 'Most of the sales came from the mainland, which was under a severe downturn. In Hong Kong, it only sold about 10 units.'
New World China Land, the mainland property arm, posted a net interim profit of HK$374.2 million, while New World Development Store China had a half-year profit of HK$258.6 million.
Shares of New World Development dropped 0.72 per cent to HK$6.89 yesterday.
