Order delays put brakes on train-makers' profit growth

Sales and profits fall amid slow economy and as the mainland holds off on bullet trains delivery

PUBLISHED : Thursday, 29 August, 2013, 12:00am
UPDATED : Thursday, 29 August, 2013, 3:56am

The mainland's biggest train-makers say sales and profit fell in the first half of the year after a delay in orders for bullet trains.

CSR, the mainland's biggest train-maker, and China CNR said that the economic slowdown had also put a dampener on their operations.

China CNR said it expected "steady growth" in the second half of the year, as state-run China Railway Corp had opened a tender for 91 bullet trains, ending a two-year order hiatus.

Premier Li Keqiang said last month that railroads were the key for the mainland "to get rich" as he tries to stimulate an economy growing at the slowest pace in more than a decade.

"The train-makers were adversely affected by the lack of new orders in the first half," said Xu Minle, a Shanghai-based analyst at Bank of China International. "Looking ahead, things will be better as the tenders for trains have begun and the government has voiced its support for the rail system."

Shares in CSR, which builds high-speed trains on its own and in a joint venture with Canada's Bombardier, fell 1.67 per cent to HK$5.83 in Hong Kong yesterday. China CNR shares fell 0.93 per cent to 4.24 yuan in Shanghai.

China Railway's bullet-train tender, announced this month, is part of more than 50 billion yuan that will be spent on new trains by the company. Expansion of the high-speed network, which includes the world's longest line, has lured passengers from airlines, prompting China Southern Airlines and Air China to offer discounted fares.

The mainland aims to have a high-speed train system comprising four north-to-south and four east-to-west lines covering 90 per cent of the population by 2020. The east-west networks are under construction, while Beijing-Guangzhou is one of three north-south lines in service.

"The operation of the company was to a certain extent affected by the slowdown in the economy of China and the delay in the tender invitation of its major customers," CSR said in a filing to the Hong Kong stock exchange on Tuesday.

The company's net income declined 24 per cent to 1.46 billion yuan, the Beijing-based train-maker said.

Meanwhile, China CNR's profit fell 5.4 per cent. The mainland's economic growth slowed for a second quarter to 7.5 per cent in the second quarter of the year, extending the longest streak of expansion below 8 per cent in at least two decades.

The mainland split the Ministry of Railways into two in March as Beijing's new leaders sought to pare bureaucracy and eliminate graft in a department that had more than two million employees and debts of 2.8 trillion yuan.

Some administrative functions went to the Ministry of Transport's State Railway Administration and China Railway took over commercial operations.