CHINA Vanke Co., the residential property developer at the center of a high-profile power struggle, said Sunday its business operations have suffered as a result of the battle for control.

    While net profits at Vanke, China’s biggest home builder, rose 10 percent in the six months to the end of June, the company said some of its partners and customers have raised concerns about the company’s prospects in the coming months.

    Vanke said in June it was seeing some signs of pressure building in its business, with moves by financial conglomerate Baoneng Group, its biggest investor, to oust its board threatening its the health by leaving some projects facing cancelation and banks reconsidering how they rate its credit.

    “In particular, the filing of a proposal for removal of directors and supervision at the end of June, had resulted in shrinking confidence of the company’s partners and customers, interruption to business expansion, and confusion among the company’s staff,” Vanke said in a statement.

    The company, which held briefings on its earnings yesterday, didn’t comment specifically on Baoneng, its biggest investor with a stake of about 25 percent nor did it mention moves by China’s second-largest property developer, China Evergrande, to build up a near 7 percent stake in recent weeks.

    Fearing a hostile takeover bid by Baoneng, Vanke’s management announced in June an agreement on a US$6.9 billion deal with white knight Shenzhen Metro Group. Both Baoneng and Vanke’s second-largest shareholder, China Resources, have said they would oppose the deal.

    Since then, Evergrande has built up a stake that further complicates the picture, with analysts betting more purchases by the highly indebted but acquisitive firm were in store.

    Specifically, Vanke said some partners have voiced their concerns about partnering with the company to acquire land to build properties since the end of June with some proposing changes to the conditions of cooperation or even terminating such arrangements.

    Nearly all of the company’s revenues come from property development.

    Moreover, some upstream partners have proposed shortening their payment schedules while some banks have tightened credit conditions and reduced credit facilities, the firm said.

    “Customers were worried that the shareholding issue will directly affect the sustainability of the firm’s product and service quality, expressing their hesitation and adopting a wait-and-see attitude,” it said. (SD-Agencies)

    Evergrande mum on reason for Vanke buy

    CHINA Vanke has asked smaller rival China Evergrande Group several times about its motive in building up a stake in the Shenzhen-based developer, but has not received an answer, an executive said.

    Wang Wenjin, the executive vice president of Vanke, China’s biggest home builder, also told an earnings press conference in Hong Kong yesterday that Evergrande had contacted the company before purchasing the shares about their impending stock buying.

    In a filing last week, Evergrande said it had paid 5.46 billion yuan (US$823 million) for another 2.14 percent stake in Vanke, becoming its No. 3 investor.

    The stake increase came nearly two weeks after Evergrande surprised investors by buying 4.68 percent of Vanke for 9.1 billion yuan, citing the latter’s “strong results” as a reason for the investment.

    Vanke said yesterday it wants to communicate with the parties involved and hopes to reach an agreement over its shareholding soon.

    Board secretary Zhu Xu warned of challenges ahead as the protracted tussle creates uncertainty at a briefing in Shenzhen yesterday. The comments came a day after the company reported a 10 percent increase in first-half profit as a recovery in its home market boosted sales.

    Zhu also reiterated that S&P Global Ratings and Fitch Ratings may adjust Vanke’s credit ratings in future due to the ownership issue.

    The ownership dispute has prompted some banks to halt lending and spurred employees to resign at a double rate than a year earlier, putting Vanke in a “difficult situation,” Zhu said. “We hope all holders would come together for Vanke’s long-term future.” (SD-Agencies))