Thailand's Hemaraj sees big drop in industrial land sales

Customers this year mainly smaller firms

Hemaraj Land and Development Plc (HEMRAJ), Thailand's largest private industrial land developer, expects its 2009 land sales to slump by two-thirds of last year's figure, says president and CEO David Nardone.

Hemaraj sold 1,621 rai of industrial land in 2008, but this year the company is targeting only 500 rai, because of the global downturn's impact on investment and industrial land demand.

Last year's land sales figure was a record for Hemaraj, as large companies in several industries sought to expand capacity to sustain their growth.

Big buyers among its 60 land sales in 2008 included Suzuki Motor Corp, Bitumen, Thai Rayon and Nippon Steel.

So far this year, though, most clients have been small-scale businesses.

''This is due mainly to large corporations preferring to move cautiously on investments due to concern about the impact of uncertainty in the global economic and local political situations,'' Mr Nardone told the company's annual shareholders' meeting yesterday.

Despite record land sales, Hemaraj's total revenue last year dropped 4% to 4.98 billion baht, down from 5.24 billion in 2007. But its net profit rose 15% to 1.34 billion baht, up from 1.16 billion.

To balance its revenue portfolio that is still largely focused on land sales, Hemaraj has invested in utility services, such as steam and power supply, as well as construction design and management at its six industrial estates.

Hemaraj entered the water supply business last year through its wholly-owned subsidiaries Hemaraj Water and Hemaraj Clean Water.

Utility revenues rose to contribute 20%, or 924 million baht, of the company's total revenue last year. An increase from 13%, or 721 million, in 2007.

Hemaraj expects to further raise its services revenue to more than 2.5 billion baht in 2011.

Its utility earnings are set to triple in 2012 after the start of operations at the 660-megawatt Gheco-One coal-fired power plant. Utility income from the plant in which Hemaraj holds 35% is expected to provide one-third of the company's revenue from then on.

Hemaraj is freezing residential project developments planned for 2009 because of a market glut and the unsettled political situation. Residential property's contribution to company revenues has slipped from 50% in 2006 to 40% in 2007, and to less than 10% last year, in line with the number of available units.

Source: Bangkok Post 30 April 2009