China property firms see record decline
One of China’s biggest property firms delayed its earnings report while another posted a record profit decline, as the nation’s realestate crisis shows no signs of easing.
Country Garden Holdings Co (碧桂園), once the nation’s top residential builder by sales, made a surprise announcement late on Thursday that it would miss a deadline for reporting annual results, saying it needed more information
China Vanke Co (萬科), at one time the largest listed developer, said net profit tumbled 46 percent last year, the biggest drop since its 1991 listing.
The dire statements, along with a jump in bad loans at some banks, underscore how a weak economy and sluggish consumer confidence continue to weigh on home sales in the world’s secondbiggest economy.
Annual price declines deepened last month for both new and used homes, highlighting the challenge for authorities as they try to salvage the beleaguered market.
China’s property sector “will likely register the first time net loss since our coverage,” said Raymond Cheng, head of China property research at CGS International Securities HK. “We remain cautious on the sector until developers’ sales improve.”
The downturn has spared few firms, be it private or state-backed.
Country Garden and Vanke were both hailed as likely survivors just a year ago. Country Garden roiled markets when it defaulted on its US dollar debt in October and Vanke is fighting to stave off default through negotiation with insurers on debt.
Country Garden said it expects to delay publishing its results for last year beyond the March 31 deadline imposed by regulators.
The delay is likely to result in a suspension of trading on Tuesday next week, when the Hong Kong market reopens after Easter, the firm said in a filing.
The postponement signals that the developer’s troubles are entering a new chapter after a Hong Kong court received a creditor’s petition to wind up the company following the default on US dollar debt. The company also missed a coupon payment on a yuan bond this month for the first time.
The move “suggests new impediments to its restructuring, with any delays to its debt plan likely to fuel concerns of lawsuit risk,” Bloomberg Intelligence analyst Kristy Hung said in a research note.
It needs time to collect more information so it can “make appropriate accounting estimates and judgments, and reasonably reflect changes in the industry,” Country Garden said in an exchange filing.
Meanwhile, Vanke said that net income attributable to shareholders shrank to 12.2 billion yuan (US$1.69 billion) last year. The drop dwarfs a 14 percent slide expected by analysts surveyed by Bloomberg.
The giant builder said it aims to cut debt by more than 100 billion yuan in the next two years as it “firmly deleverages.”
Vanke did not propose a cash or stock dividend, skipping a full-year payout for the first time since its 1991 listing in the China market.
Its stock yesterday stumbled as much as 3.8 percent to nearly a decade low in Shenzhen. Some of its longer-dated bonds recently traded near US$0.4, approaching deeply distressed levels.
Vanke has a US$600 million bond due in June trading above US$0.90, indicating less investor concern about repayment in the short-term.