Country Garden, once China’s top property developer, announced that its annual loss in 2024 is expected to be less than 2023, which recorded a loss of 178.4 billion yuan ($24.33 billion), as the developer tries to revive its business while avoiding liquidation lawsuits.
Over the last three years, the company and several developers, such as China Evergrande and Sunac China, have missed its debt payment, causing a crisis in China’s essential property sector. The government had to intervene with supporting measures.
To reduce their losses, these companies set aside some capital in the first couple of years and cut their expenses. Country Garden stated that its inventory that needed additional provisions has largely decreased before assuring that the full-year loss in 2024 will significantly narrow.
Nevertheless, the troubled property sector will remain a financial issue for some developers in the near term. Some economists speculate that 2025 national sales will drop around 5%. Furthermore, Chinese government data show that this year’s decline may add a nearly 50% drop in the nation’s property sales over the last three years.
Country Garden has delayed the release of its 2024 interim and 2023 full-year reports until late Tuesday. As a result, the company’s shares have been suspended from trading since April 2, 2024. The developer stated that it will remain suspended until further notice.
This publication and the update on offshore debt restructuring are also Country Garden’s efforts to avoid liquidation lawsuits that relate to its non-payment of a $205 million loan.
According to the report, the company’s net loss for the first six months of 2024 was 12.8 billion yuan ($1.75 billion), following 2023’s record net loss. This loss is smaller than the 48.9-billion-yuan loss from the same period last year. The company recorded 26.8-billion-yuan of net profit in 2021, followed by a 6.1-billion-yuan net loss in 2022.
Thomas Kwok, head of equity business of CHIEF Securities, comments that there is still a long way to go to profit or cash flow. It will need homebuying power despite the slow economy.
As of the end of June last year, Country Garden had an interest-bearing debt of 250.2 billion yuan, while holding assets worth 6.7 billion yuan. Meanwhile, the provision on inventory in the first six months of last year was reduced to 2.7 billion yuan from 82.4 billion yuan for the full year in 2023.
Moreover, the company stated that despite delivering 1.7 million homes to buyers in the past three years, it still has 200,000 unfinished apartments and, as of June 2024, 3,059 projects under development.
According to a survey by real estate researcher CRIC, due to Country Garden’s annual sale value dropping by more than 70% last year, its national ranking in 2023 is reduced from 7 to 16. The company stated that to reduce its offshore debt worth $16.4 billion by 70%, it proposed to creditors the need for debt restructuring.
Nevertheless, the hearing of the liquidation will be held on January 20 next week.
