China Vanke H1 core profit up 33.5%, sees land market cooling

[HONG KONG] Land developer China Vanke Co posted a 33.5 per cent rise in first-half core profit, helped by a property boom and higher margins, and said it expected the market to cool.

Vanke has emerged from a prolonged struggle for boardroom control that dragged down its business operations last year.

The battle ended when state-owned Shenzhen Metro Group affirmed control in June by raising its stake to 29.38 per cent, surpassing financial conglomerate Baoneng Group that had sought to oust Vanke's management.

Vanke, China's second-largest developer by sales, has since said it will work closely with the subway operator. It has also stepped up efforts to implement a railway-plus-property strategy in Tier 1-2 cities that involves building properties around railway networks.

Shenzhen-based Vanke said in a statement on Thursday its core profit, which excludes revaluation gains, was 7.1 billion yuan (S$1.45 billion) over the first six months.

Net profit rose 36.5 per cent from a year ago to 7.3 billion yuan, while revenue dropped 6.7 per cent to 69.8 billion yuan, due to fewer completed projects during the period.

Gross profit margin improved 7.2 percentage points from a year ago to 24.8 per cent.

"As the residential property market stabilizes, (we) expect the land market will also cool down," it said in the statement.

Vanke is due to hold an earnings conference on Friday afternoon.

Like Vanke, other Chinese developers such as China Overseas Land and Investment and Country Garden have also reported strong results for the first six months of the year, as China property prices remain strong.

The government has been taking measures, such as home and land purchase restrictions as well as price limits on sales, to rein in the real estate market. While this has weighed on larger cities, smaller centres remain robust.

Analysts say the property curbs will likely impact developer's financials only from next year.

REUTERS