New | New World China Land warns profit to drop 55 per cent in six months to December
New World China Land, the mainland China property arm of New World Development, said on Monday its profit is expected to drop by 55 per cent in the six months period to December, after a sharp slowdown in project delivery.
The expected drop in revenue was due to cyclical reasons arising from a major decline in the volume of completed projects by 45 per cent year on year to 522,702 sqm, down from 955,166 sqm a year earlier, Henry Cheng Kar-shun, the chairman and managing director of the company, said in a statement with the Hong Kong stock exchange on Monday.
Shares of New World China have increased nearly 9 per cent this year, compared with a 4 per cent increase each in the city’s benchmark Hang Seng Index and New World Development.
Ahead of the profit-warning statement, New World Development failed to take its China property unit private in July last year, after the shareholders of the mainland real estate arm rejected its HK$18.6 billion proposal, citing unattractive offers by the blue-chip company.
In the six month period to December last year, the company’s contracted sales dropped 22.4 per cent year on year to 7.23 billion yuan, while average selling price fell to 12,575 from 13,073 yuan per sqm for the same period.
The company has cut its contracted sales target to 12.5 billion yuan (HK$15.79 billion) for the fiscal year ending in June 2015, reflecting the nationwide slowdown in the world’s second biggest economy.
In addition to weaker sales, gross profit margin of property sales declined by 10.5 per cent to 40.4 per cent in December, due to an drop in exchange gain by HK$214 million, it said, citing the currency flotation of the renminbi last year.
The renminbi has fallen 0.64 per cent in 2015 to about 6.2466 against the US dollar, following a 2.4 per cent decline last year.
The currency depreciation was the first full year of decline in value since Beijing switched to link the value of the renminbi with a basket of foreign currencies and eliminated a peg with the greenback in 2005.
