An employee walks past a logo of Vanke at its headquarters in Shenzhen, south China's Guangdong province, November 2, 2015. Reuters/Tyrone Siu/File Photo

By Saikat Chatterjee and Clare Jim

HONG KONG (Reuters) – China Vanke Co, the residential property developer at the centre of a high-profile power struggle, said on Sunday its business operations have suffered as a result of the battle for control.

While net profits at Vanke, China’s biggest home builder, rose 10% in the six months to the end of June, the company said some of its partners and customers have raised concerns about the company’s prospects in the coming months.

An employee walks past a logo of Vanke at its headquarters in Shenzhen, south China’s Guangdong province, November 2, 2015. REUTERS/Tyrone Siu/File Photo

Vanke said in June it was seeing some signs of pressure building in its business, with moves by financial conglomerate Baoneng Group, its biggest investor, to oust its board threatening its the health by leaving some projects facing cancellation and banks reconsidering how they rate its credit.

“In particular, the filing of a proposal for removal of directors and supervision at the end of June, had resulted in shrinking confidence of the company’s partners and customers, interruption to business expansion, and confusion among the company’s staff,” Vanke said in a statement.

The company, which will hold briefings on its earnings on Monday, didn’t comment specifically on Baoneng, its biggest investor with a stake of about 25% nor did it mention moves by China’s second largest property developer, China Evergrande, to build up a near 7% stake in recent weeks.

Fearing a hostile takeover bid by Baoneng, Vanke’s management announced in June an agreement on a $6.9 billion (£5.28 billion) deal with white knight Shenzhen Metro Group. Both Baoneng and Vanke’s second-largest shareholder, China Resources, have said they would oppose the deal.

Since then, Evergrande has built up a stake that further complicates the picture, with analysts betting more purchases by the highly indebted but acquisitive firm were in store.

Specifically, Vanke said some partners have voiced their concerns about partnering with the company to acquire land to build properties since the end of June with some proposing changes to the conditions of cooperation or even terminating such arrangements.

Nearly all of the company’s revenues come from property development.

Moreover, some upstream partners have proposed shortening their payment schedules while some banks have tightened credit conditions and reduced credit facilities, the company said.

“Customers were worried that the shareholding issue will directly affect the sustainability of the group’s product and service quality, expressing their hesitation and adopting a wait-and-see attitude,” it said.

Net profit attributable to shareholders rose 10.4% to 5.35 billion yuan (£615.26 million), from a year ago. Revenues totalled 70.75 billion, an increase of 48% over the corresponding period, the company said in a filing.

Shares in the company have outperformed the broader Shenzhen market over the past three months due to the corporate battle.

(Reporting by Saikat Chatterjee and Clare Jim; Editing by Kenneth Maxwell and Keith Weir)

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