L&H's first-half sales dropped 21 per cent, from Bt10.4 billion in the same period last year to Bt8.2 billion. Its second-quarter net profit fell almost 50 per cent to Bt726 million from Bt1.43 billion a year ago, while first-half earnings also fell, from Bt2.51 billion last year to Bt1.44 billion this year.

This is the first time since the 1997 economic crisis that L&H, considered the country's most financially sound property-development company, has suffered from falling sales and a decline in net profit.

"We're not the only company suffering from a sales drop. But this loss may not show up on first-half balance sheets of other companies, because they managed to sell houses last year before they were finished, taking in the money this year instead. But we sell completed houses and so immediately suffer from lower demand," said executive vice president for finance Adisorn Thananun-narapool.

He said the country's 21 listed property firms were expected to show average first-half sales growth of 18 per cent but a 32-per-cent drop in earnings due to higher costs. During the six-month period, L&H's gross profit margin fell from to 31.27 per cent, from 34.2 per cent for the same period last year.

L&H is not the only property company expected to suffer from the economic slowdown. A Government Housing Bank report said that in the first five months of this year, only 28,189 new houses were registered - an increase of only 3.5 per cent on year. Of these, 16,258 units were developed by property companies, down 8.22 per cent from the 17,714 units in the same period last year. The other 11,931 units were self-built, up 25.29 per cent from the 9,523 units in the same period last year.

"Home-buyers are concerned about their future earnings after the increases in oil prices and interest rates, which have had a negative impact on consumers, because their cost of living has increased," said L&H executive vice president for marketing Naporn Sunthornchitcharoen.

Naporn explained that when home-buyers decided to buy a new house, they had to believe their future earnings would increase. However, the economic slowdown and uncertain domestic political climate have made them fearful of the future.

In order to reach the company's sales target of Bt20 billion, Naporn said they must re-examine the company's business plan, reducing L&H's housing stock from an average of 400 finished houses a month to 300, in order to match the market slowdown.

However, the company plans to continue with the launch of 12 new property projects this year, worth a total of Bt25 billion. Four of these were launched in the first half, with the next eight planned for the second half. Two of the upcoming projects will be town houses with price tags of Bt2.8 million to Bt3 million per unit.

"We believe the property market will continue to decrease in the second half of the year, following on the first half. However, signs that interest rates are stabilising in the second half may be a good sign for home-buyers who are trying to decide whether to buy," said Naporn.

He said that meanwhile, L&H had two new town-house projects aimed at the middle market, which is part of the company's bid to drive its second-half sales.

Adisorn added that the company was also continuing with its plan to spend Bt4 billion for new land plots for development next year. Half the sum was spent in the first half, and the rest will be spent in the second half.

"We have to buy new land for our business in the future, because we believe the upcoming election will have a good effect on business. We've continued to collect land for development next year to replace our current projects, which will sell out this year," he said.

Somluck Srimalee

The Nation