The largest Chinese real estate developer would have lost more than US$ 6,000 million until June

Only in July, the promoter sold 60% less than in the same month last year and 78% less than two years ago

Country Garden, the largest real estate developer in China, expects to report losses of between 45,000 and 55,000 million yuan (between US$6,243 and US$7,630 million, between €5,698 and €6,946 million) by the end of this month in the first semester of this year.

In a statement sent last night to the Hong Kong Stock Exchange -where it is listed-, the company attributes this possible result to the drop in gross profit margins and the increase in provisions for impairment on its real estate developments due to the drop in sales in the framework of the crisis in the sector, as well as other factors such as fluctuations in foreign currencies.

Specifically, sales of Country Garden -national leader in this section in 2022- fell 35% year-on-year in the first seven months of this year to around 140,800 million yuan (US$19,597 million, €17,836 million), a figure that also represents a 61% decrease from the same period in 2021.

Only in July, the promoter sold 60% less than in the same month last year and 78% less than two years ago.

“Since 2021, the sector has entered a period of unprecedented difficulties,” the statement said.

This situation, together with the “recent deterioration of the financing environment”, has also caused the firm’s funds to have been “continually reduced”, entering a situation of “progressive liquidity pressure”.

“One must pick himself up when he has fallen. The company will fulfill its responsibilities, will make every effort to rescue itself, will take effective measures and will fight to reverse the prevailing difficulties”, says the document, which reveals that the board has established a special working group to face the “major adversities” since its foundation.

Country Garden faces million daily losses

Country Garden delivered 700,000 properties in 2022 and expects to match that number this year, in line with one of Beijing’s top priorities in the context of the real estate crisis: the completion of projects sold off-plan, of great importance for the country’s social stability. since homes are one of the most common investment vehicles among Chinese families.

Despite its problems, the company assured that it has “sufficient net assets and abundant land reserves”: specifically, at the end of 2022 it had some 309.600 million yuan (42.955 million dollars, 39.210 million euros) in net assets and with a total of salable resources of 1.21 trillion yuan (167.729 million dollars, 153.027 million euros).

Information recently emerged in the international press indicated that the promoter had failed to comply with the interest payment terms of some extraterritorial (‘offshore’) bonds.

The Hong Kong newspaper South China Morning Post recalled that the company will face a large volume of debt maturities in the coming months: between December and January, it will need a total of about 2,000 million dollars to pay offshore bonds.

For its part, the “peak” of debt issued in China (‘onshore’) will come earlier, in September, when the promoter must pay the equivalent of about 1,000 million dollars in bonds.

Shares of Country Garden in Hong Kong fell 7.7% today just before 12:00 local time (04:00 GMT) and have already lost more than 64% of their value so far this year.

The financial position of many Chinese real estate companies worsened after, in August 2020, Beijing announced restrictions on access to bank financing for developers that had accumulated a high level of debt, among which Evergrande stood out with liabilities of almost 340,000 million Dollars.

In recent months, given the situation, the Government announced various support measures, with state banks also opening multimillion-dollar lines of credit to various developers.

Recently, the authorities announced that they would prolong the package of support measures and promised to “adjust and optimize” the measures on the sector after recognizing “important changes” between supply and demand in the real estate sector.