July 31, 2018 / 6:25 AM / 3 months ago

China's Country Garden resumes work on most projects after accident: analysts

HONG KONG (Reuters) - Chinese property developer Country Garden (2007.HK) has resumed construction at 90 percent of its projects in the country after halting them for inspections following an accident last week, two analysts who were briefed by the firm on a call said.

Country Garden said on Friday it had halted all projects in China for security inspections following an accident at its construction site in the eastern province of Anhui that killed six people.

Chief financial officer Bijun Wu said on the call held late on Monday that she expected the remaining 10 percent of projects would resume construction within days and the stoppage had no impact on the company’s full-year new-start and completion targets for its projects, the analysts told Reuters.

News of the accident and construction halt had sent the company’s shares down 7.4 percent on Monday. The stock fell a further 2 percent by midday on Tuesday.

Country Garden confirmed to Reuters the Monday investor call and the unchanged targets.

The developer has already had two other safety incidents over the past two months, Chinese media reports say. The Anhui accident raises questions about quality control as developers chase fast cash collection and amid a common industry practice of outsourcing construction work to other companies.

According to the analysts, CFO Wu told investors on Monday that construction work of around 20 percent of the company’s 2,100 projects was not led by the company, as many were co-invested with other developers.

She also said the company, which has expanded quickly in smaller cities in the past few years, would be more selective in choosing cities going forward, they said. The analysts declined to be named as they were not authorized to speak to media about the call.

Country Garden told Reuters it will only expand in small cities where there is enough demand. Regarding construction suppliers, it said it chooses companies according to their industry ranking and reputation, and would suspend co-operation if any issues crop up during inspection.

Brokerage CLSA said in a research report on Monday before the call it expected Country Garden’s sales growth might slow in the second half compared to the previous six months, as the company rethinks its strategy in third-tier cities where margins are compressed.

Reporting by Clare Jim; Editing by Muralikumar Anantharaman

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