Sharp rise in profit at property company
Sunac China Holdings announced a 111.8 per cent surge in gross profit to 2.88 billion yuan (HK$3.40 billion) for the year ended December 31, up from 1.36 billion yuan a year earlier. The company said that its gross profit margin grew 15 percentage points to 43.3 per cent.
During the year under review, Sunac China Holdings maintained steady development and realised revenue of 6.65 billion yuan and a sales contract value of 8.33 billion yuan. As a result, the company announced a net profit of 1.54 billion yuan for 2010, a sharp rise of 77 per cent over the previous year.
'The rise in income was mainly due to the enriched product range and the company has shifted its product mix to high-value products like villas and houses,' said Sun Hongbin, chairman, CEO and executive director of the company.
Construction of the group's development projects has commenced as planned despite Beijing's implementation of a series of macro-control measures that made the market environment more rigorous. The gross floor area of delivered projects last year amounted to about 711,521 square metres, according to the company.
Foreseeing that the existing austere market conditions would continue in the coming year, the company has taken the existing situation and future market conditions into full consideration when formulating its plans and objectives, Sun said.
Looking ahead, Sunac China Holdings plans to purchase prime land and continue to develop the sales of large, high-quality integrated residential and commercial properties to target customers.
The company aims to strengthen and consolidate its position in the Bohai rim, south Jiangsu and Chengdu-Chongqing, while increasing its market presence in Beijing, Tianjin, Chongqing and southern cities, including Wuxi and Suzhou, through developing existing projects and launching new projects in these cities.
'We aim at capturing the rapid expansion of the real estate market on the mainland, while sustaining a stable and high growth potential, as well as selectively expanding our investment portfolio to diversify our sources of income so that we may achieve rapid and stable development and generate the best return for our shareholders,' Sun said.
Sunac China Holdings plans to put together a set of progressive operation strategies that include strengthening corporate governance, internal control and human management in order improve long-term competitiveness.
'We are well prepared for the long run and will keep track of the market trend, make projections and adjust the pace of development or sales growth of different cities and different projects, ensuring the realisation of its operational goals for 2011,' Sun said.
The company engaged in six development projects from January 1 to January 31, including Sunac Jin Yuan, Sunac Hua Fu, Changping project, Binhai New District project, Sunac Lushan and University Town. It acquired 3,170,000 square metres in its land reserve that will be used for operation plans in the coming years.
The group's cash and cash equivalents, including restricted cash, increased by 119.5 per cent from 1.94 billion yuan a year earlier to 4.25 billion yuan as of December 31, while the net cash used in operating activities reached 1.58 billion yuan. 'We operate in a capital-intensive industry and have historically financed, and expect to continue to finance, our working capital, capital expenditures and other capital requirements through proceeds from the presale and sale of properties, borrowings from commercial banks and other parties, capital contributions from shareholders, and new share issuances,' Sun said.
'Since ensuring an absolutely safe cash flow is the group's prominent objective, we will manage our cash flow more stringently and prudently in 2011. Our long-term liquidity requirements relate to funding the development of our new property projects and repaying our long-term debt, and our sources of long-term liquidity include loans, capital contributions from shareholders, and share issuances.'
The net cash used in operating activities in 2010 was primarily attributable to the group's profit before income tax and changes in working capital representing a cash outflow of 3.92 billion yuan.
The property development and investment segment recorded a profit before income tax of 2.603 billion yuan, while the property management services segment recorded a loss of 5.68 million yuan bringing a total profit before income tax to 2.597 billion yuan.
Sunac China Holdings, which listed on the Main Board of the Stock Exchange of Hong Kong on October 7 last year, acquired the remaining 49 per cent equity interests in Wuxi Sunac Real Estate, and 40 per cent equity interests in Chongqing Yuneng and APEV Property Management. The board did not recommend payment of a final dividend for the year ended December 31.