China New Town Development fully explains profit margin fall

Firm attributes decline to falling land prices.

The Singapore Exchange inquired China New Town Development Company Limited about its worsening profit margin despite unit costs for land development in Shanghai Luodian and Shenyang Lixiang projects were kept unchanged.

"The fall of gross profit margin is mainly due to the decrease of average unit land sale price from RMB7,323 per square meter in 2011 to RMB3,531 per square meter in 2012. The drop substantially resulted from three key elements, namely the land market conditions, plot ratio and land location," said the listed property developer.

"Under the relatively more positive land market conditions in 2011, the land sold was located in Shanghai with higher plot ratio of 2.5. Comparatively, four saleable pieces of land sold during this financial year were located in both Shanghai and Wuxi with lower plot ratio of 1.8, 1.2, 1.0 and 1.01 respectively. Even though the proceeds sharing percentage was increased, there was a relatively greater decrease in the average unit land sale price, hence, causing a decrease in the gross profit margin," it added.