State-owned builder reports uptick in first-half earnings

State-owned rail builder and engineering company China Communications Construction Company saw an uptick in its net profit in the first half of 2017. The company also vowed to promote the transfer of equity interests in its subsidiary company, though it was not included in the pilot mixed-ownership reform scheme.

“We will promote the negotiated transfer of equity interests in our subsidiary Shanghai Zhenhua Heavy Industries Company Limited steadily, in order to further highlight the strengths of our main businesses,” said Fu Junyuan, chief financial officer of China Communications Construction.

The company will advance the subsidiary’s reform of its salary distribution system, profoundly implement classified assessment and differentiated distribution, actively explore the implementation schemes for employee stock ownership, stock option incentives and equity dividends, and promote mixed ownership pilot reform in business segments or subsidiaries where conditions are appropriate.

In the future, China Communications Construction will gradually develop into a builder and operator of large urban complexes. It has signed contracts with Nansha district in Guangzhou of Guangdong province, but the project needs five to 10 years to produce the desired result.

The company’s net profit increased 8.4 percent to 7.87 billion yuan in the first half of 2017, compared with the same period of the previous year, due to the improved infrastructure construction business. Its revenue grew 3.8 percent to 189.28 billion yuan for the reporting period. Basic earnings per share increased to 0.43 yuan, compared to 0.4 yuan for the corresponding period of 2016.

The value of new contracts for the first six months surged 52 percent to 431.2 billion yuan, while the value of newly signed PPP contracts reached 40.3 billion yuan, representing 9 percent of that total value.

“The central government issued documents regulating the financing behavior of local governments in the first half of the year, which alleviated the impetus of PPP (Public-Private Partnership) to infrastructure construction in the short run, so the percentage of PPP projects in newly signed contracts decreased to 9 percent in the first half. But we believe in the long run, the regulations can reasonably prevent the financing risks of local government, safeguard the legitimate interests of the social investment entities, making PPP the only compliant mode for the government’s infrastructure investment projects,” Fu added.

Hong Kong listed China Communications Construction dropped 1.7 percent to close at HK$10.42 (85 US cents) per share on Wednesday. In comparison, the benchmark Hang Seng Index grew 1.19 percent to 28,094.61.