China Vanke puts need for cash ahead of year’s investment target
China’s biggest developer by sales, China Vanke, said investment in new projects would miss its target this year as the home builder increased cash reserves to fight a prolonged industry downturn.
The Shenzhen-based developer on Sunday reported a 2.8 per cent year-on-year rise in net profit to 1.65 billion yuan (HK$2.09 billion) in the third quarter, slower than a 5.6 per cent increase in the first half.
The 14 key cities on Vanke’s radar screen, including Beijing, Shanghai and Guangzhou, sold 71 per cent of new property supply in the third quarter, better than the second quarter’s 65 per cent. The oversupply pushed average inventory level to 16.4 months by the end of September from 15.3 months at the end of June.
It added in a stock filing that Vanke started new construction of 13.7 million square metres in the first nine months, finishing 61.1 per cent of its full-year plan.
The company attributed slow investment to rising competition in cities suffering high inventories, which forced Vanke to change its product portfolios and delayed new construction.
“We expect the newly started construction area this year will be below our year-start plan,” Vanke said. “Such adjustment will help keep our competitiveness and maintain reasonable pace of supply as well as inventory structure.”
By the end of September, Vanke had 25 billion yuan of finished but unsold homes, accounting for 7.1 per cent of all its various inventories.
The company cut its net debt ratio to 26.2 per cent by the end of September, from 30.6 per cent at the start of the year, it said, adding that cash on hand rose to 48.7 billion yuan from 44.4 billion yuan during the period, after it acquired 27 new land parcels with attributable floor space of 4.15 million square metres.