Rail chief warns next results will be derailed

PUBLISHED : Tuesday, 17 April, 2012, 12:00am
UPDATED : Tuesday, 17 April, 2012, 12:00am


China Railway Group yesterday warned that its first-half results would be hurt by the slowdown in rail spending but expected to increase orders for urban metro railways tenfold this year.

'During the first half, few new rail projects were launched. Many rail projects originally scheduled to start in the first half have been delayed. This will affect our results in the first half as our orders will be affected,' China Railway chairman Li Changjin said.

China Railway chief financial officer Li Jiansheng said some rail projects were facing a cash crunch.

The Hong Kong- and Shanghai-listed firm's capital expenditure would tumble from 21.73 billion yuan (HK$26.6 billion) last year to 10 billion this year, she added.

In the first two months of this year, the country's rail construction spending fell 67.5 per cent to 20.8 billion yuan, according to the Ministry of Railways.

But the state-owned company's urban metro rail orders would jump tenfold to 150 billion yuan, chairman Li predicted.

In the first quarter, China Railway received more than 100 billion yuan of metro rail orders, including a 26 billion yuan order for the Shenzhen Line 11, three lines worth more than 30 billion yuan in Chengdu, three worth more than 30 billion yuan in Kunming and an 8 billion yuan contract in Nanjing.

Li said 1 trillion would be spent on urban rail projects during the 12th five-year plan for 2011 to 2015.

Separately, CSR Corporation, a leading rolling stock maker, yesterday announced it had won 3.3 billion yuan of orders.

They include a 850 million yuan order to supply trains for Subway Line 1 in Wuxi city, Jiangsu province; a 980 million yuan contract for Subway Line 14 in Beijing; and a 1.36 billion yuan deal to supply trains to the MTR Corporation for the high-speed link between Hong Kong and the mainland scheduled to open by 2016.

Urban metro rail projects on the mainland are financed by city governments, not the Railways Ministry.

A key reason for the slowdown in rail construction is the Railways Ministry's huge debt of 2.3 trillion yuan and a gearing of more than 50 per cent.

Li said China Railway also expected to win 60 billion yuan of expressway contracts this year.

China Railway builds more than half the mainland's urban and intercity rail projects, which account for 60 to 70 per cent of its business. But it is diversifying into property, mining, airports, ports and highways.

Li said he expected more rail orders in the second half, including a 180 billion yuan contract for a rail link between Inner Mongolia and Hunan province. As such, he is confident that China Railway will able to achieve its target of lifting its new orders 14 per cent to 650 billion yuan this year.

China Railway also hoped to win a 50 billion yuan contract to build a conventional rail link between China and Laos, for which it has already done the survey and design, Li disclosed. Beyond this year, China Railway hoped to win 100 billion yuan of contracts to build rail links between China and Myanmar, he added.

But a high-speed link between China and Laos, originally envisaged by former Railways Minister Liu Zhijun before he was arrested in February last year, has been delayed, and both governments are still discussing this project.