Bloomberg News

China Vanke 3rd-Quarter Profit Rises 32% on Sales to Homeowners

October 24, 2011

Oct. 24 (Bloomberg) -- China Vanke Co., the country’s biggest developer by market value, said third-quarter profit rose 32 percent as it focused on sales to homeowners as the government intensified curbs aimed at speculative buyers.

Net income climbed to 606 million yuan ($95.1 million), or 0.055 yuan a share, from 459.5 million, or 0.042 yuan, a year earlier, the company said in a filling to the Shenzhen stock exchange today. Revenue rose 66 percent to 9.3 billion yuan.

“Our products are targeting mainly homebuyers for own occupancy, so the impact of the government policies is relatively small,” the company said in the statement. “The sales in the third quarter were clearly better than the overall market.”

China increased down-payment requirements and mortgage rates on some homes this year and issued housing purchase restrictions in about 40 cities. Vanke’s profit jumped as most of the 70 cities monitored by the government posted gains in the first nine months this year from the same period in 2010, led by less affluent, or second- and third-tier cities.

The company’s contracted sales, based on bookings of apartments before they are built, rose 36 percent to 97 billion yuan in the first nine months from a year earlier. Vanke will “for sure” exceed the 100 billion yuan target for sales by the end of October, it said in an e-mailed statement on Oct. 10. Still, contracted sales fell in August and September from a year earlier, the first decline in 2011.

Hedging Sales Drop

“As a company with a nationwide portfolio, Vanke’s profits are hedged by rising home prices, even if their sales volume are falling,” Xiao Jian, a Beijing-based analyst for Southwest Securities Co., said before the earnings were announced. “Sales of the entire industry have been hit by the government’s property curbs.”

Vanke rose 3 percent to 7.19 yuan at the close of trading in Shenzhen today. The stock has fallen 13 percent this year, compared with the 18 percent decline in the broader CSI 300 Index and 15 percent retreat in the gauge of property stocks on the benchmark Shanghai Composite Index.

Vanke had 33.9 billion yuan of cash by the end of September. An “ample amount of capital” is Vanke’s advantage, Board Secretary Tan Huajie said in an e-mailed press release today, adding that it will be “cautious” in buying land because the market hasn’t “bottomed out.”

--Bonnie Cao. Editors: Linus Chua, Andreea Papuc

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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