China Vanke's earnings growth slows amid country's property curbs

CHINA Vanke Co, the nation's largest listed residential developer, reported a slowdown in profit growth in the first half, due to lower margin on projects and regulatory curbs that have dampened the real estate industry.

Net income in the six months ended June 30 declined 12 per cent to 11 billion yuan (S$2.3 billion), the Shenzhen-based company said in a statement on Sunday. That compares with 6 per cent growth a year earlier. Revenue increased 14 per cent to 167.1 billion yuan. Sliding gross margin from property sales has been a concern for Vanke. The company is focusing on so-called tier-1 and tier-2 cities, where margins are thinning due to rising land prices.

Chairman Yu Liang said in March that it has become clear that the higher-than-average profitability at China's residential industry will fall.

Vanke last year expected the pandemic to have a "real big" impact on its business up to 2021, prompting it to cut dividend payouts to retain cash.

The gross margin from its main property business shrank to 28 per cent last year from 35 per cent in 2019.

The property sector has changed profoundly, and Vanke is diverting away from a sole focus on property developments, adding real estate management and service business into its focus, it said in a statement on Sunday. BLOOMBERG