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SCC looks for silver lining

2009. 27 August

( The restructuring of major State-owned big businesses in Shanghai is likely to benefit Shanghai Construction Co (SCC) in the long run, but may not help other local construction firms much as they have to grapple with falling government demand and suspension of projects during the half-year expo period, analysts said.

SCC, the largest locally-based State-owned construction and engineering service
provider, said operating revenue rose 33 percent to 18.5 billion yuan in the first half aided by strong returns from expo and highway projects.

"The firm is heavily involved in the construction of expo-related projects, and revenue from these projects contributed significantly to the overall performance," said Wang Wanjin, analyst, Donghai Securities without disclosing the exact amount contributed. As the main contractor for the 18-billion yuan expo-related projects, SCC has participated in 35 construction projects, accounting for 77 percent of the overall construction volume, said a local newspaper.

With most of its 2010 World expo projects approaching completion stage, SCC said it expected a drop in business from its non-expo-related projects after the local government suspends construction of urban real estate projects within the 25-sq-km area near the expo site between June 1 to Oct 31, 2010 to ensure the clean environment of the world expo.

"The decrease is foreseeable but the amount cannot be estimated. I would say the drop in its business turnover would be 10 percent at least," said Wang.

Despite the gloomy business outlook next year, analysts said Shanghai's ongoing massive SOE reform might give a shot in the arm to SCC.

SCC's parent company Shanghai Construction Group in late July transferred part of its core business assets, worth at 5.2 billion yuan, into SCC.

The move expanded SCC's business range to cover transportation and commercial property development.