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China property

China’s largest developer Country Garden says it will slow down after construction-related deaths

New focus on safety announced on same day the company released strong interim results, leaving its shares up nearly 8 per cent

PUBLISHED : Tuesday, 21 August, 2018, 2:11pm
UPDATED : Tuesday, 21 August, 2018, 10:45pm

Country Garden, China’s most rapidly expanding property developer, said it would slow down after construction accidents that left seven workers dead.

“We will adjust the pace of launching new projects and will develop in a slower way. We have put safety and quality in the first place as we saw some construction accidents happen in the past couple months,” Country Garden president Mo Bin said on Tuesday.

Mo made his remarks at a briefing after the company released strong interim results. Its shares ended up nearly 8 per cent at HK$12.240 at the end of trading on Tuesday.

Chinese property developers face rising complaints as rush to build hits safety and quality

Even before the vow to focus on safety, China’s largest developer by sales was experiencing a slowdown in its home-sales growth, according to its interim report.

Its contracted sales slowed in the first half of the year compared to the same period in 2017, with 42.8 per cent growth versus 131 per cent growth, amid government cooling measures on the property market.

“The property sector is seeing tightened credit in the mainland, and we will be more cautious in buying land. We’ve asked our staff to focus more on the operation of our current projects,” Mo said.

The Guangdong-based developer reported an 80.2 per cent increase in core net profit, which excludes valuation gains and foreign exchange losses, to 12.95 billion yuan (US$1.9 billion) in the first half of the year.

Net profit jumped 94.9 per cent to 16.32 billion yuan in the six months ending June 30, while total revenue grew 69.7 per cent to 131.89 billion yuan, it said in a filing to the Hong Kong stock exchange.

In the six-month period, the company expanded to another 41 cities in the country, bringing its property development portfolio to a total of 261 cities in 30 provinces. It also has property developments in Malaysia and Australia.

It plans to hand over the first batch of 482 units at its Forest City project in Malaysia in December.

Chinese property developers squeezed by weaker yuan, rising cost of overseas debt

However, Chinese developers are facing a liquidity squeeze as the result of the government’s deleveraging campaign, which makes it harder for companies to get funds, and caps on selling prices. The squeeze has pushed developers to build and sell as many properties as possible to quickly get income from sales.

In addition to those headwinds, Country Garden has had to deal with the serious accidents at its construction sites.

Last month, six workers died after an entire construction site run by the company in eastern Anhui province collapsed in heavy rain and high winds. In June, a person died at another company site in Shanghai. And on July 12, a massive sinkhole opened up at one of its sites in Hangzhou.

“We reflected on the matter and concluded that our inadequate attention to safety contributed to the accidents,” chairman Yeung Kwok Keung wrote in a letter to investors.

“... Life is invaluable. ... The company is aiming for zero casualties,” he added.

The company reported that its net gearing ratio – net debt over total equity – inched up 2.1 percentage points to 59 per cent at the end of June 30. Available cash stood at 209.91 billion yuan, up 41.4 per cent from 148.4 billion as of the end of 2017.

The company will pay an interim dividend of 0.1852 yuan per share.

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