Recently, the 2012 national total-price 'King of Land' bid won by central enterprise MCC was forcibly reclaimed by the Nanjing Municipal Government, and MCC's operational problems have resurfaced. MCC, whose main business is under significant operational pressure, hopes to expand its real estate business, but currently the real estate business is struggling to support the company alone.

　　Central enterprises like MCC do not entirely need to be responsible to investors in their operations. In this year's assessment by SASAC, central enterprises are required to achieve added value growth of over 8% and profit growth of over 10%, which forces central enterprises to expand against the economic downturn and become bigger and stronger. It is not easy for central enterprises to complete such high profit growth tasks, and sometimes it may even backfire…

MCC Group's Nanjing 'King of Land' plot reclaimed, accused of being stretched by huge investment

　　Nanjing 'King of Land' reclaimed, real estate unlikely to be MCC's lifesaver

　　Recently, the 2012 national total-price 'King of Land' bid won by central enterprise MCC was forcibly reclaimed by the Nanjing Municipal Government, and MCC's operational problems have resurfaced.

　　Central enterprise China Metallurgical Group Corporation (MCC) suffered a huge loss of 6.952 billion yuan in 2012, becoming the third-largest loss-maker after China Ocean Shipping (Group) Company.

　　Among the four main businesses of engineering contracting, equipment manufacturing, resource development, and real estate development, only the real estate business of China MCC achieved actual growth in operating revenue in 2012.

　　Compared with MCC's huge loss of nearly 7 billion yuan, the real estate development segment can be described as 'outstanding' in the company's performance data. In 2012, MCC's real estate development operating revenue was 25.265 billion yuan, accounting for 11.26% of all business segments. At the same time, the real estate business's gross profit margin of around 20% also far leads the other three major businesses, so MCC's investment in the real estate sector is growing larger.

　　Unfortunately, the timing was not right. MCC entered the real estate business relatively late and has missed the golden decade of real estate. The real estate business is also struggling to support the company alone.

　　What made MCC even more distressed in 2013 was that the national total-price 'King of Land' won last year with a sky-high price of 5.62 billion yuan was reclaimed. The announcement said it was forcibly reclaimed due to public interest needs, but this is a major blow to MCC's real estate business expansion. For MCC, the only business it can temporarily rely on has also suffered a setback.

MCC's 2012 performance huge loss approaching the loss king, overseas strategy setback

　　MCC hopes to become bigger and stronger, but suffered a huge loss of nearly 7 billion last year

　　China MCC's huge loss in 2012 is believed to be caused by diversified expansion in recent years. On the one hand, due to historical reasons and overcapacity in the steel industry, upstream demand for metallurgical engineering has declined, and the main business is under significant operational pressure; on the other hand, overseas project expansion has not been smooth, and China MCC's Australian project costs are high, significantly weakening profitability.

　　Affected by macroeconomic control of the steel industry, MCC has vigorously promoted business diversification in recent years, hoping to increase the revenue proportion of non-metallurgical engineering businesses and increase the contribution of non-engineering contracting businesses such as resource development and real estate development to the company's performance. At the same time, it has vigorously expanded overseas markets and strengthened research and development of core technologies including metallurgy, equipment, and resource development.

　　Central enterprises hope to become bigger and stronger and are interested in diversified development, which is understandable. But MCC's front is too long and management is chaotic, ultimately leading to huge losses.

Central enterprises with huge losses such as COSCO and MCC, constrained by industry cycles, will find it difficult to achieve the 10% target this year

　　This year's 10% profit growth target forces MCC to expand against the trend

　　In recent years, the macroeconomy has entered a downward cycle, and central enterprise profits have shown a declining trend. SASAC has made maintaining growth the top annual task at the 2012 and 2013 central enterprise leaders' meetings and other meetings.

　　In April 2013, SASAC Director Jiang Jiemin required that central enterprises achieve added value growth of over 8% and profit growth of over 10%.

　　Statistics show that in 2012, central enterprises supervised by SASAC achieved a cumulative operating revenue of 22.5 trillion yuan, an increase of 9.4% over the previous year; total profits were 1.3 trillion yuan, an increase of 2.7% over the previous year.

　　Now the bank 'money shortage' is becoming more serious, liquidity is tightening, making loans increasingly difficult. Central enterprises are naturally no exception. Coupled with the slowdown in economic growth since the beginning of this year, it is by no means easy for central enterprises like MCC, which suffered huge losses, to complete the 10% profit growth task this year.

　　Generally speaking, in a downturn, enterprises will carry out drastic reforms and contractions in their business lines, gradually withdrawing from businesses with low relevance to the main business and no hope of turning around. However, central enterprises like MCC do not entirely need to be responsible to investors in their operations, but need to complete the targets set by SASAC, which forces central enterprises to expand against the economic downturn and try to become bigger and stronger. Once they encounter a downturn, huge losses will occur, and not only will they fail to complete the task, but it will also backfire.

　　Conclusion: Under SASAC's assessment mechanism, central enterprise MCC hopes to become bigger and stronger and is interested in diversified development, but due to too many fronts and inability to develop, the Nanjing '5.6 billion King of Land' was ultimately reclaimed.