China Railway Group First-Quarter Net Rises 87% on Stimulus

China Railway Group Ltd. (390), the nation’s biggest construction company by total assets, said first-quarter profit jumped 87 percent as China started to spend part of a 4 trillion yuan ($586 billion) economic-stimulus package that includes transportation infrastructure.

Net income increased to 982 million yuan ($144 million), or 0.05 yuan a share, from 526 million yuan, or 0.02 yuan, a year earlier, the Beijing-based company said in a statement to the Hong Kong stock exchange today. Sales rose 71 percent to 60 billion yuan.

China will spend 600 billion yuan on new railway projects this year, including as much as 70 billion yuan in the first quarter, Che Tanlai, a senior engineer at the Economic and Planning Research Institute at the Ministry of Railways, said on April 23. The government will approve 2 trillion yuan of new rail projects this year and next, adding 20,000 kilometers (12,430 miles) to the nation’s network, according to government data.

China Railway Group fell 2.1 percent today in Hong Kong trading to close at HK$5.18 before the announcement. The shares have dropped 3.5 percent this year, compared with a 1.2 percent gain in the benchmark Hang Seng Index.

Net income fell 46 percent to 1.35 billion yuan, or 0.063 yuan a share, for 2008, from 2.49 billion yuan, or 0.186 yuan, China Railway Group said in a separate statement today. The drop was due to foreign exchange losses on proceeds from a share sale in Hong Kong because of fluctuations in currency rates, it said.

In a third statement, China Railway Group said it will issue medium-term notes worth a maximum of 12 billion yuan. The tenure of these bonds will not exceed 10 years in a single or multiple tranches in China, it said.

China Railway Group will use the proceeds to repay loans and supplement its capital, it said.

To contact the reporter on this story: Lee Spears in Beijing at lspears2@bloomberg.net.

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net.

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