Chinese property developer Country Garden said that the company is expected to record an unaudited net loss for the six months ended 30 June 2023, as compared with the net profit of about 1.91 billion yuan and the core net profit attributable to the owners of about 4.91 billion yuan a year earlier.
“The expected net loss was primarily attributable to the decrease in gross profit margin for real estate business and the increase in provision of impairment for property projects under the impact of the downward trend in sales of the real estate industry,” the company said in a filing to the Hong Kong stock exchange on Monday, which also blamed the loss on foreign exchange fluctuations.
According to data released by the company on July 4, the homebuilder’s sales reached 128.8 billion yuan in the first half of 2023, sliding more than 30% from an already low base in the same period in 2022.
Country Garden, which is one of a few private Chinese developers that haven’t defaulted on debt payment, said it will consider taking various measures to ensure the security of cash flow, including but not limited to reducing various operating expenses, accelerating loan collection arrangements, expanding financing channels, and managing and optimizing debt repayment arrangements.
Notably, the developer said it will actively seek guidance and support from the government and various regulators, an expression viewed by many market participants as a signal to seek help and led to a sell-off of its bonds and stocks.
Several of Country Garden’s onshore bonds slide by more than 20% on Monday and its Hong Kong-traded shares slid by 6.5% to close at HK$1.58.
The company, whose bond prices have been under tremendous pressure despite signing earlier this month a dual tranche loan deal, has significant bond maturities coming up later this year.
In March this year, Country Garden had said that, by the end of 2022, its total outstanding debt stood at 271.3 billion yuan, decreasing by 14.7% from a year earlier, and its debt-to-asset ratio, excluding receivables, stood at 69.4, lower than the red line of 70%. Its net gearing declined by 5.4 percentage points from a year earlier to 40%, marking a new low in ten years.
