Due to delays in four residential projects, Zhejiang-based developer Greentown China saw its 2007 net profits drop 27 pecent to 923 million yuan.

Its revenue fell 10 percent year-on-year to 5.7 billion yuan, while its gross profits margin slid from 44 percent to 36 percent.

The company's vice-chairman and chief executive officer, Shou Bainian, attributed the drop in profits margin to the firm's diversified property mix.

Of all the sales revenues in 2006, 75 percent came from lucrative projects in Zhejiang. But the region accounted for just 21 percent of Greentown's sales last year, significantly dragging its profits margin, Shou said.

"The profits margin is relatively low in cities we just entered, but it will gradually improve," Shou said, adding that the profits margin will stay flat this year.

He said the delay in residential projects in Shanghai and Hangzhou was to blame for the drop in the net profits.

Those projects' sales will be booked this year, he said.

The company acquired 10 million sq m of land in 2007, bringing its land reserves to 22 million sq m.

With an 88 percent gearing ratio, Shou said the company will commit to land acquisition in a prudent manner in the future.

The company will increase its land reserves via partnerships, as well as seek multiple financial channels to raise its purchasing power.

Targeting 23 billion yuan in sale revenues for the whole year, Shou remained positive that the objective could be achieved given the sales for the first quarter were about 4.6 billion yuan.

The capital expenditure for 2008 is about 8 billion yuan. Shou said that 5 billion yuan of the amount is earmarked for construction expenses, while the remaining 3 billion yuan is being used to pay off the arrears of the newly-added lands last year.

The average selling price was down 3 percent in 2007. Shou expects it to grow 20 percent this year in light of more luxury projects.

Commenting on the market's future, Shou said the outlook for the next five years is still positive, and he predicted the market will undergo a consolidation with sizable players increasing their presence via acquisitions.

(HK Edition 04/23/2008 page2)