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Firm posts 42.5% gain in 2010 net profit to 2.72b yuan

BBMG Corporation, a cement maker and property developer in the Bohai Rim region, plans to expand its affordable housing development operations this year to take advantage of favorable government policies, the company said Monday after posting a 42.5 percent gain in its full-year net profit for 2010.

The company's net profit amounted to 2.72 billion yuan ($0.42 billion) for the year ended December 31, up 42.5 percent compared with 2009, as its revenue soared 65.8 percent year-on-year to 22 billion yuan, thanks to brisk home sales growth and a strong leap in cement demand. The board proposed a final dividend of 0.07 yuan per share, unchanged from 2009.

Rising on a nationwide housing boom, BBMG's cement sales volume surged 95.1 percent to 28.45 million metric tons in 2010, with the segment revenue rising 84.3 percent year-on-year to 9.95 billion yuan. The average selling price of cement stood at 274 yuan per metric ton, up slightly from 273 per metric ton in 2009.

Looking ahead, BBMG's President Jiang Deyi said the cement business, which has exhibited "a stronger growth momentum than the company's other business segments in the past several years as a result of industry consolidation", will remain central to the company's business. And the demand will remain robust, supported by the government's massive investment in infrastructure and affordable housing construction.

It is estimated that the construction of 10 million units of affordable housing in 2011 will drive up investment in property development by 12.43 percent and generate an extra 100 million metric tons of cement demand.

The past year saw China's real estate investment grow 33.2 percent to 4.83 trillion yuan from 2009, buoyed by rising demand and surging home prices.

Besides the cement business, which contributed 44.5 percent of BBMG's revenue in 2010, another focus of the company's business going forward will be property development.

Home sales revenue for 2010 amounted to 6.96 billion yuan, up 88.3 percent from a year earlier and accounting for 31.2 percent of BBMG's 2010 revenue.

Pre-sold ground floor area (GFA) rose 72.7 percent year-on-year totaling 898,000 square meters in 2010, with the pre-sold area of affordable housing rising 6.1 times to 569,000 square meters. Pre-sold GFA of commodity housing dropped 25.2 percent from 2009. BBMG had 6 million square meters of land reserve as of end-2010.

As one of the largest affordable housing developers in China, BBMG prizes an exceptionally high gross profit margin for affordable housing construction, which was recorded at 20 percent for 2010. The industry average, however, falls somewhere between 3 percent and 5 percent. The fatter margin is, according to the company's CFO Wang Hongjun, due to the lower cost incurred by transforming industrial land into a construction site for homes compared with land acquisition in the wider market.

Around 1 million square meters of BBMG's industrial land will undergo such transformation in 2011, most of which, the president noted, will be used for affordable housing construction.

For 2011, a major task of the company is to "accelerate affordable housing construction", said Jiang, as the company seeks to benefit from construction of a combined 0.77 million units of affordable housing this year in Beijing, Tianjin and Hebei province where BBMG operates the vast majority of its businesses.

China Daily

(HK Edition 04/12/2011 page3)