• Mon
  • Jul 28, 2014
  • Updated: 2:40pm

Vanke ambitious growth

PUBLISHED : Saturday, 27 August, 1994, 12:00am
UPDATED : Saturday, 27 August, 1994, 12:00am

PROPERTY development firm China Vanke Co aims to achieve net earnings of up to 180 million yuan (about HK$160 million) this year.


The ambitious plan was revealed a week after the mainland firm, which sought a B-share listing on the Shenzhen Stock Exchange in May, announced moderate profit growth to 83.16 million yuan in its interim results.


Chairman Wang Shi said the company's two construction projects in Shanghai and another in Qingdao were expected to make substantial contributions to the group's earnings for the year.


Mr Wang said he expected the two Shanghai projects, Vanke Plaza and Vanke City Garden, to provide a net profit of about 100 million yuan after they were either sold or leased out.


''Profit contribution from the two Shanghai property developments will account for around 50 per cent of the group's full-year earnings in 1994,'' said Mr Wang.


Other sources of income will include the sale of Qingdao Silver Garden and other diversified investments such as trading, retailing business and equity.


It was expected to achieve net earnings of nearly 180 million yuan for the whole year, according to Mr Wang.


Property sales remain Vanke's major earnings contributor, accounting for 60 per cent of the company's profits in the first half of the year, and it is expected to generate up to 70 per cent of its full-year earnings.


Due to the economic austerity measures imposed by Chinese Vice-Premier Zhu Rongji, which tightened bank lending policies in the second half of last year, Vanke's investment focus has shifted to property trading rather than property investment.


For property trading, financing was not a problem because investors could realise capital through the pre-sale programme, Mr Wang said.


However, it was hard to develop a property for long-term use if a company was not cash-rich because it could not find financial support after the imposition of the economic controls, he said.


The new tax system also hit Vanke's first-half earnings, especially the trading business which had dropped about 68 per cent in turnover and 5.7 per cent in profits compared with figures for the same period last year.


But Mr Wang said China's real estate tax would not have a serious impact on the company's earnings from property because the profit margin in its development projects were only 30 per cent, slightly exceeding the investment return level allowed by the Chinese Government.


Looking ahead, Mr Wang said company strategy in the second half would focus on property development and diversification into retailing and trading businesses.


Investment in listed and unlisted companies would be reduced because of their expected limited growth potential.


Commenting on the disappointing performance of its B share, Mr Wang said investors were confused about the company's nature of business because it had moved from trading into property-related areas in the past few years.


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