China property

Chinese property firm Vanke’s first-half profit rises 25 per cent as faster construction lifts sales

The company reports US$1.3 billion in net profit for the January to June period

PUBLISHED : Monday, 20 August, 2018, 11:03pm
UPDATED : Monday, 20 August, 2018, 11:03pm

China Vanke, the country’s second-largest property developer by sales, posted a 25 per cent rise in first-half profit on Monday, as a faster construction speed helped it sell more homes.

Net profit climbed to 9.1 billion yuan (US$1.3 billion) for the first six months of this year, while revenue rose 55 per cent to 105 billion yuan from the same period last year.

Vanke achieved 23.2 million square metres (249.7 million square feet) of new construction floor area, up 40 per cent from the first half of last year and accounting for 66 per cent of its planned construction for this year.

A number of Chinese developers have adopted a “build fast and sell fast” model this year in the face of government caps placed on the prices they can sell at, as well as increasing difficulty in getting funding because of government concerns over rising debt at property firms.

The country will firmly “contain home price gains”, China’s top political body, the Communist Party’s Politburo, stated in July.

As a result most developers expect that the going will get tough in the second half of this year and into 2019.

Developers downcast over survival as China gets serious on stabilising home prices

Most expect to report a good first-half however. China Evergrande Group, the third-largest developer by sales in 2017, said it expected its core profit in the first half to double from last year. It will report results next Tuesday. Country Garden also forecast its half-year net profit to rise by more than 50 per cent. However, Soho China posted a core net loss of 3 million yuan for the first half on Friday.

Vanke’s operating profit margin rose 2.11 percentage points to 27.83 per cent for its core property development business, while that of its property services unit declined 2.45 percentage points to 16.43 per cent.

It is also looking to expand its long-term rental housing business, and has made this part of its core business for the first time. It currently leases 40,000 flats across 30 cities that target young people and families, and has acquired over 160,000 flats for rent in total.

Vanke generated 95 per cent of its revenue from its property development business in the first six months.

It will not pay an interim dividend or issue bonus shares.

Shares of the firm rose 2.9 per cent in Shenzhen to close at 23.35 yuan on Monday ahead of the results announcement, while its Hong Kong shares edged up 0.8 per cent to HK$25.