Company warns of cost pressures
Half yearly profit at mid-sized builder Hanison Construction Holdings (0896) has tumbled by half after the company took a hit on property sales and change of fair value of its investment properties.
For the six months to 30 September 2013, the company recorded a profit attributable to owners of the company of HK$56.2 million, representing a drop of 51.7 percent compared to the same period in 2013.
Turnover also went south, edging down 5.9 percent to HK$763.5 million.
The company attributed the lower profit and turnover to fewer property sales and a lower gain on the change in fair value of its investment properties.
As an indication of stubborn cost pressures, cost of sales was HK$659.3 million for the period, up slightly from the HK$655.1 million in 2012.
This caused gross profit to plunge 33.4 percent to HK$104.3 million.
“While the local labour market remains in a state of nearly full employment and government infrastructure works are being rolled out in phases, the escalating labour cost and labour shortage will continue to pose pressure on business operation in various sectors,” the company said in stock exchange notice Tuesday.
Coupled with increasing material costs, the company said the various business lines of construction, interior and renovation, building materials would “work against a stiff headwind to maintain profit margins”.
It warned that continuing uncertainty arising from whether the government will continue its property market cooling measures as well as the policy of supplying more land on the market and other macro-economic factors could affect the property development business.
Turnover from property development segment plunged from HK$213 million last year to HK$94.8 million in 2013.
This was partly offset by the construction segment edging up 17.2 percent to HK$563.6 million.
However construction remained an pitifully low profit business with the construction segment squeezing out a segment result of about HK$4 million compared with HK$29.7 million for property development and HK$39.4 million for property investment.
The company is carrying out various building projects such as the public rental housing development at Tseung Kwan O Area 65B and various residential projects in Mongkok, Jordan and Quarry Bay.