China Communications Construction Co., the nation’s biggest builder by market value, plans to more than double the assets of a unit managing toll-roads and bridges to shield earnings from swings in construction demand.
The company plans to boost its investment unit’s net assets to 20 billion yuan ($3.2 billion) by 2015 from 9 billion yuan at the end of 2011, Chairman Zhou Jichang said in an interview in Hong Kong yesterday. The unit will also run facilities such as ports and business parks, rather than just building them.
The push for operations deals at home and overseas will help the Beijing-based company offset fluctuations in Chinese construction caused by state policy, Zhou said. The company, which helped build the new San Francisco Bay Bridge, has said orders growth may drop to 9 percent this year from 11 percent last year as the government eases stimulus measures.
“Orders slow immediately if the government tightens monetary policy,” Zhou said. “We must address this situation and reduce the impact.”
The builder expects the investment unit to account for 20 percent of profit by 2015 and 40 percent in the long term, he said. It generated 1 billion yuan of profit last year, or about 8.5 percent of total earnings, he said. China has pared its economic expansion target to 7.5 percent this year from the 8 percent goal in place since 2005.
The company, which also operates China’s largest fleet of dredgers and builds port cranes, raised 5 billion yuan in a Shanghai share sale earlier this month. That was 75 percent less than a previously announced target.
The Shanghai stock rose 0.5 percent to 5.57 yuan at the close. That’s 3.1 percent more than the share sale price. In Hong Kong, the builder rose 4.4 percent to HK$7.79, extending gains this year to 28 percent.
The company will open a unit based in Hong Kong later this year to help win investment deals overseas, Zhou said. The company has already won building contracts in the Middle East, Africa and Asia. It is seeking to enter markets including South America, Russia and Eastern Europe, he said.
The company’s operating assets in China include the Beijing Capital Airport expressway, Chenglingji New Port on the Yangtze River in Yueyang, and the Liancheng Bridge in Xiangtan, Hunan province. Such deals are often awarded as build-operate-transfer agreements, where a private operator runs an asset for a number of years and collects fees before handing it to the government.
“This is a new business model for us,” Zhou said. “In the past, we bid for building projects with low margins, now it’s different. We invest, so you must give me the whole project.”
The company also said earlier this week it plans to issue as much as 12 billion yuan of bonds with maturities of five to 15 years. Zhou didn’t give any further details on the timing of the offering.