China Rail-Builders’ Profits Fall as Construction Slows on Crash

China Railway Construction Corp. (1186) and China Railway Group Ltd. (390), the world’s second- and third-largest listed builders, reported declines in first-half profit as the government pared spending on new lines following a crash.

CRCC’s net income dropped 12 percent to 3.2 billion yuan ($504 billion) under domestic accounting standards, according to a Shanghai stock exchange filing late yesterday. China Railway Group’s profit fell 2.2 percent to 2.39 billion yuan, under international standards.

Sales fell more than 10 percent at both of the Beijing- based builders as the government cut first-half spending on new railways by 39 percent following a fatal high-speed train crash last year. Rival China Communications Construction Co. also said yesterday it will increase its focus on overseas lines because they are more profitable than the domestic market.

CRCC said it will “actively seize” new opportunities to pare its reliance on building railways. China Railway Group has won a contract to build a bridge linking Hong Kong, Zhuhai and Macau as it also looks for new work.

CSR Corp. (1766), China’s biggest trainmaker by market value, also reported a 6 percent decline in first-half profit because of a slowdown in domestic demand and higher research costs. The Ministry of Railways in July raised spending plans for railroads and bridges this year by 14 percent to 470 billion yuan, as the government boosts investment to spur economic growth.

China Railway Group won 290 billion yuan of contracts in the first half, up 22 percent from a year earlier. It had expected to book 650 billion yuan of orders this year. First- half infrastructure-construction sales dropped 15 percent to 164 billion yuan.

CCRC’s contract wins rose 37 percent from a year earlier to 280 billion yuan. The tally for domestic rail projects dropped 9.4 percent to 18.4 billion yuan. Sales fell 13 percent to 184.5 billion yuan.

To contact the reporter on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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