Company shifts focus from sales to maintaining its management team

The battle for control of China Vanke Co Ltd is taking such a toll on the troubled real estate giant that the company has shifted priority from acquiring land and increasing sales to keeping its management team stable, the first time it has had to do so its 32-year history, executives say.

The admission came when the company released its 2016 interim results in Shenzhen, where Vanke Chairman Wang Shi and President Yu Liang were notable by their absence, as they were busy "dealing with ownership issues".

Sun Jia, executive vice-president, told the briefing on Aug 22 that Vanke had lost many employees in the first half of this year, after major shareholder Baoneng Group's massive buy-up of shares triggered a heated war for control of the company.

Board Secretary Zhu Xu says it has also faced difficulties such as acquiring new land, falling project sales and weakening cooperation with partners.

Between the end of June and August, she says, 31 projects have been forced to modify clauses, postpone or even terminate due to partners' concern over Vanke's branding, management and funding situation.

Wang Wenjin, another executive vice-president, warns that the company may also face challenges such as a negative outlook and downgrades by domestic and international rating institutes.

In fact, China Merchants Securities Co later on Aug 22 downgraded Vanke's rating to -A, saying its long-term outlook is still positive, but the ownership dispute has had a negative influence on its management.

Although seeing a 10 percent increase in its net profit to 5.35 billion yuan ($803 million; 712 million euros) and 49 percent revenue growth in the first half of this year, according to its interim report, Vanke in July lost more than 30 percent in both sales area and value.

The battle for control escalated last month when Vanke announced an asset-restructuring plan worth 45.6 billion yuan with Shenzhen Metro Group that would make the subway operator its biggest shareholder.

Zhu notes that no agreement has so far been reached over the plan, and that Vanke hopes to communicate with involved parties in a bid to solve the dispute soon.

chaihua@chinadailyhk.com