Greentown profit down 67pc

PUBLISHED : Monday, 25 August, 2014, 10:23am
UPDATED : Monday, 25 August, 2014, 10:23am

Greentown China, a mainland luxury-home builder, on Monday reported a 67 per cent year-on-year slide in first-half net profit to 613 million yuan (HK$772 million), as high land costs and low selling prices compressed its profit margin.

Core net profit, excluding one-off gains from acquisitions and revaluation gains, fell 59.2 per cent, despite a 23 per cent rise in revenue to 12.6 billion yuan.

The weaker result was mainly due to a significant drop in the share of results of joint ventures and associates, an aggregate loss of 121 million yuan in the first half of this year versus a gain of 685 million yuan during the same period last year, Greentown said in a statement to the Hong Kong stock exchange.

The Hangzhou-based developer’s gross profit margin fell to 24 per cent from 29.7 per cent a year earlier.

The prosperity of China’s macro-economy is the true way to lead to a full recovery of the real estate market
Greentown China

“In light of the current market environment, the company will further strengthen sales, improve inventory turnover, speed up returns, adjust development pace, strictly control costs and improve its land bank structure through wisely selected high-quality projects to lay a solid foundation for its future development,” Greentown said.

The result was widely expected after the company issued a profit warning early this month. Its share price opened down 1.6 per cent to HK$7.80 on Monday morning.

The company’s chairman, Song Weiping, his wife, and executive vice-chairman Shou Bainian announced the sale of a combined stake of 24.3 per cent to Sunac China, a close working partner, for HK$12 per share in cash in May.

The deal made Sunac its largest shareholder, alongside Hong Kong developer Wharf. Regulatory procedures concerning the proposed transaction were still under way, the company said in Monday’s statement.

In the first seven months of the year, Greentown’s contracted sales totalled 31.8 billion yuan, hitting 49 per cent of its full-year target.

It said the relaxation of housing policy seen on the mainland in recent weeks had helped restore market confidence. But it cautioned that “while the gradual recovery of the market will boost the sales of our products, which will likely lead to a better sales performance, nonetheless, it is well recognised that the prosperity of China’s macro-economy is the true way to lead to a full recovery of the real estate market”.