Evergrande is sowing seeds for future growth

A visitor walks past the stand of Evergrande Group during an exhibition in Shanghai, China, October 6, 2013. [Photo/IC]

Developer sets up three subsidiaries for agriculture-related businesses

Guangzhou-based real estate giant Evergrande Group launched three subsidiary companies on Monday in Arshaan, the Inner Mongolia autonomous region, to boost its business portfolio and sustain future development.

The three subsidiaries will be engaged in the agricultural sector in the fields of grain and oil, dairy and animal husbandry, representing the developer's efforts to diversify its businesses.

"By diversifying our businesses, we are aiming to become one of the world's top 500 companies in 2015," said Liu Yongzhuo, vice-president of Evergrande Group.

According to Liu, Evergrande will invest more than 100 billion yuan ($16.2 billion) in the agricultural sector in the next few years, accounting for nearly one-tenth of China's agricultural investment in 2013.

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Evergrande has so far invested about 7 billion yuan to acquire and develop 22 production bases in the grain and oil, dairy and husbandry industries. The bases are located in an ecological circle around the Greater Hinggan Mountains, an area in Northeast China known for its abundant agricultural resources.

"The area will help ensure green and safe agricultural products for Chinese consumers," said Liu.

Xu Jiayin, board chairman of Evergrande, said at a midyear performance meeting of the group in Hong Kong on Aug 26 that Evergrande would rely on "diversified business" for sustainable development.

"After years of effort in the real estate sector, we have mapped out a strategic plan to diversify our business. We will rely on the diversified business for future development," said Xu. The plan was based on an assessment of performances of the world's top 500 companies, according to Xu.

"Most of the companies started to engage in diversified businesses after they realized good performance in a single industry," said Xu.

"We are confident that we will be on the top 500 list next year," he said.

Evergrande, which was founded in 1997 in Guangzhou, the capital of Guangdong province, mainly concentrated on the real estate industry before it became a household name after investing in a Guangzhou-based soccer club in 2010.

After years of rapid development, China's property market is experiencing a downturn and putting pressure on major developers as they report a decline in net profits in the first half of this year, due to rising inventories, the cooling of buyers' expectations and price corrections.

According to the Shanghai-based Wind Information Co Ltd, total net profit of 82 listed real estate companies dropped 3.57 percent year-on-year to 20.098 billion yuan in the first half of this year. During the last few years, Evergrande has been investing in other business areas, aiming to ward off a possible downturn from its main property business.

Evergrande has now developed into a group engaged in property, culture, tourism, consumer goods, agriculture and sports industries, with assets exceeding 420 billion yuan. Sales of the Evergrande Group exceeded 80 billion yuan during the first seven months of this year, according to company sources.

The group launched its first consumer product - bottled water - in November of last year, representing its efforts to broaden its business activities. Sales of the bottled water are expected to exceed 10 billion yuan this year, according to company sources.

On Monday, about 3,500 dealers from 735 cities across the country gathered in Arshaan to sign contracts with Evergrande for orders of its grain and oil products.