HONG KONG, April 27 (Reuters) - China Vanke Co , the nation’s second biggest property developer, said on Thursday it expected a further rise in net profit this year, despite reporting a 16.5 percent drop in its first-quarter profit due to higher costs.
Vanke said in its results statement that while its sales by area in the first quarter rose 81 percent from a year ago, the overall area pre-approved for sale in the 14 major cities it focuses on recorded a decrease of 37.9 percent, pointing to a lower supply in the market.
Vanke’s core profit in the Jan-March period, which excludes revaluation gains, declined 16 percent to 676.2 million yuan ($98 million), while net profit fell 16.5 percent to 695.4 million yuan on revenue up 27.2 percent at 18.6 billion yuan.
“The group is of the view that the year-on-year decline in the profit for the first quarter of 2017 was not very meaningful to its annual results,” the company said.
On Wednesday the central city of Xian’s housing authority said it had suspended sales by Vanke, which has 12 development projects there, on suspicion of some property transactions being “against regulation”.
The Xian House Management Bureau, in statements on its website dated April 24, said it suspected three property agents sold units at Vanke’s Oriental Legend and Cityglory projects before obtaining pre-sale approval.
The local authorities of major Chinese cities imposed price caps on new launches late last year in an effort to rein in home prices that were causing worries of a housing market bubble developing.
Some Chinese developers are delaying the launch of new home sales in the hope of riding out the restrictions.
Vanke declined to comment on the impact of the sales suspension in Xian, which accounted for about 4 percent of its overall sales last year, according to analysts.
It’s unclear what the total value of the suspended projects is, but media reports said Vanke was aiming for sales worth 20 billion yuan in the city this year, up from the 15 billion yuan of sales made last year.
Smaller peer China Overseas Land & Investment Ltd last week said its first-quarter operating profit rose to HK$7.8 billion ($1 billion) from HK$7.1 billion in the same period last year before restating for CITIC Ltd’s residential property business acquired in 2016.
Vanke, the subject of a long-running battle for boardroom control, did not comment in the statement on the affair even though the current board’s term of office expired on March 27.
Vanke said last month no time had been set for the selection of a new board as various parties were discussing proposals, while company rules allow the current board to remain in place until a new board is appointed. ($1 = 6.8930 Chinese yuan renminbi) (Reporting by Clare Jim; Editing by Greg Mahlich)