Vanke hikes H1 profit but warns of rough ride ahead

Shanghai

CHINA'S biggest property firm, Vanke, on Monday blamed a takeover that it is trying to fight off for worsening business conditions, even as it reported higher profits.

Bosses of Vanke, China's largest residential developer by sales, have for months been trying to stave off what would be the country's first hostile bluechip takeover, after private conglomerate Baoneng bought a stake of more than 20 per cent, becoming its biggest shareholder.

Chairman Wang Shi and his executives own only around 0.2 per cent of the 270 billion yuan (S$54.8 billion) firm.

But they retain a tight grip on it by virtue of their positions, and have proposed a controversial asset swap deal with a state-owned subway operator that would heavily dilute existing shareholders.

Analysts say that takeovers are crucial to efficient markets and the allocation of resources.

But in its earnings statement to the Hong Kong exchange, where it is listed, the firm said that the battle had "caused negative impacts on the normal operation of the Group".

From June to August, 31 land acquisition projects and five property management schemes have been terminated, suspended, or had renegotiations sought due to the fight, the statement said, adding that the firm also faced "tightened credit conditions" from banks.

But surging Chinese home prices propelled its first-half earnings to 74.8 billion yuan, a 48.8 per cent jump, it said. The firm said that it "could not rule out the possibility of future results being affected by the shareholding issue".

Employee resignations were running at double the rate of a year ago, putting the firm in a "difficult situation", company secretary Zhu Xu told a briefing in Shenzhen, according to Bloomberg News.

Another property firm, Evergrande, has stepped in to buy a stake of nearly 7 per cent in Vanke - worth nearly US$3 billion - but has yet to make its intentions clear.

By midday, Vanke was up 1.34 per cent in Shenzhen and was 0.74 per cent higher in Hong Kong after the earnings statement. AFP