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Shanghai Forte earnings fall on impairment losses

By Hui Ching-hoo (China Daily)
Updated: 2009-03-05 07:54

Shanghai Forte Land yesterday said its 2008 full year earnings fell 85.7 percent over previous year to 101 million yuan due to impairment losses of certain projects, but forecast strong sales for this year.

Shanghai Forte President Fan Wei said strong sales in January and February indicate a good year for the company. He said it has set a sales target of 625,000 sq m of pre-completion gross floor area (GFA) this year with an estimated value of 5.5 billion yuan.

Fan shrugged off the skepticism, and said: "Sales response in January and February was positive. Plus, the saleable areas for this year are larger than last year's. I don't think the sales target is over-optimistic."

The company recorded 350 million yuan in sales revenue for the first two months of this year, an increase of 60 percent over same period last year. The sales figure for the first two months have already reached 10 percent of its target for this year.

He noted that the average selling price, at 8,000 yuan per sq m, is in line with 2008 prices. Last year, the company's contracted sale GFA was 360,000 sq m, amounting to 3.16 billion yuan.

Despite the price cut last year, the company does not see any further pressure on prices at the moment. Whether the company will further adjust the price is dependent on the market trend, Fan said.

The company has earmarked 5.2 billion yuan for capital expenditure this year. Of this, land cost will be around 1.2 billion yuan and construction cost 4 billion yuan.

Forte currently owns 6.85 million sq m GFA land reserve across 11 mainland cities such as Shanghai, Beijing, Nanjing and Tianjin. The land reserve is sufficient for development over the next three to five years.

The company has a gearing ratio of 70 percent now and it will issue more debt to reduce the gearing ratio, he said.

Forte had sought approval from the regulator in October for a 1.9 billion yuan corporate bond issue. "If the company cannot issue the bonds by the end of the year, we will increase sales cash flow to reduce debt."

Commenting on the property market, Fan said he expects the government to unveil more steps to buoy the sector, as it is one of main pillars of the country's economy.