By Clara Jim
HONG KONG (Reuters) -Country Garden said it expected to post a smaller annual loss in 2024, as the embattled developer looks to revive its business and avoid a liquidation lawsuit after reporting a record loss of 178.4 billion yuan ($24.33 billion). ) in 2023.
The 2023 loss announced on long-overdue accounts late Tuesday included more than $11 billion of inventory value impairment as an unprecedented housing market slowdown in China hit homebuyer confidence. .
country garden (HK:) and a number of other developers, including China Evergrande (HK:) and Sunac China defaulted on their debt repayment obligations over the past three years, triggering a destabilizing crisis in the economically crucial real estate sector and forcing Beijing to announce support measures.
Country Garden, once China’s top developer by sales, hopes to reduce its losses is in line with many peers that have also defaulted on their debts, having booked most provisions in the first two years of the crisis and cut expenses, offsetting to a certain extent the drops in income. .
“Thanks to relatively large provisions in 2023, inventory requiring additional provisions has largely decreased; we expect the full-year loss in 2024 to narrow significantly,” Country Garden said in a separate statement.
However, the poor outlook for the real estate sector will continue to cloud the financial performance of cash-strapped developers in the near term, with some economists expecting domestic sales to fall by around 5% in 2025.
This year’s drop would add to a nearly 50% drop in property sales in China over the past three years, according to government data.
Guangdong province-based Country Garden, which defaulted on $11 billion in offshore bonds at the end of 2023, had delayed the release of its 2023 full-year reports and its 2024 interim reports. As a result , its Hong Kong shares have been suspended from trading since April 2, 2024.
After the accounts were published, the developer said its Hong Kong-listed shares would remain suspended from trading until further notice. He did not provide further details.
The release of Country Garden’s results and an update on its offshore debt restructuring last week are linked to its efforts to defend itself against a winding-up petition filed by a creditor in a Hong Kong court in relation to the non-payment of a loan of 205 million dollars.
It reported a net loss of 12.8 billion yuan, or $1.75 billion, in the first six months of 2024, following a record net loss in 2023. Most rival developers also reported losses or declining profits in 2023.
However, last year’s interim loss has narrowed from a net loss of 48.9 billion yuan a year ago, while the full-year figure compares with a net loss of 6.1 billion yuan in 2022 and a net profit of 26.8 billion. of yuan in 2021.
“The path to return to profit or restore cash flow is still very long,” said Thomas Kwok, head of CHIEF Securities’ equity business. “It will largely depend on the country’s housing purchasing power, but China’s economy is slowing.”
Country Garden’s 2024 annual accounts are due at the end of March.
DECREASE IN INVENTORY PROVISIONS
Country Garden had interest-bearing debt of 250.2 billion yuan at the end of June last year, while its cash and cash equivalents amounted to 6.7 billion yuan, its financial presentation showed.
The provision on inventories in the first six months of last year was 2.7 billion yuan, compared with 82.4 billion yuan, or $11.2 billion, for the full year 2023.
Country Garden said it still has 200,000 apartments to complete construction after delivering 1.7 million homes to buyers in the last three years. It had 3,059 projects in development throughout the country as of June 2024.
Country Garden’s annual sales by value fell more than 70% last year, pushing its national ranking down from 7th to 16th in 2023, according to a survey by property researcher CRIC.
Country Garden said it had proposed to creditors a debt restructuring that would reduce its $16.4 billion offshore debt by 70% and had reached an “understanding” with a group of lenders.
The next liquidation hearing will take place on January 20.
(1 dollar = 7.3311 renminbi)