Wuzhou International shifts focus to second-tier cities in China
In a bid to stabilise profit margins, the logistics property developer moves to bigger urban areas
Mainland trade centre and logistics property developer Wuzhou International Holdings has decided to switch to second-tier cities and maintain gross profit margin of between 40 per cent and 45 per cent in the long run.
Global credit agency Fitch Ratings said in a September report that the commercial developer's decline in gross profit margin, to 41 per cent in the first half of this year from 44 per cent last year and 53 per cent in 2012, would be permanent.
A reliance on third-tier cities and high sales, general and administrative expenses incurred from fast expansion, despite efforts to reduce funding costs, are behind the slide.
Company founder and chairman Shu Cecheng said: "We were mainly in third-tier cities in the past. We are moving to second-tier cities now.
"We will not go to first-tier cities if the investment threshold is too high," he told the South China Morning Post.
So far this year, Wuzhou has invested in provincial capitals including Changchun, Shenyang and Zhengzhou, and expanded to central and western cities such as Xian, Chengdu and Wuhan.