Country Garden Holdings is facing the most difficult time.
On August 10, Country Garden Holdings issued a profit warning, saying that the net loss in the first half of this year would be between 45 billion yuan and 55 billion yuan, compared with a net profit of 1.91 billion yuan in the same period last year. The announcement of the
Country Garden Holdings pointed out that the expected net loss was mainly due to the decline in gross profit margin of the real estate business and the increase in impairment of property projects as a result of the decline in sales in the real estate industry, as well as the expected net exchange loss caused by foreign exchange fluctuations. The
Country Garden Holdings is currently experiencing its biggest difficulties since its establishment, and before the profit warning was issued, the market's concern about the Country Garden Holdings had reached its peak.
On August 8, the Country Garden Holdings reported that two US dollar coupons were due to be paid on August 7 but had not yet been paid. At that time, the Country Garden Holdings said that there was a 30-day grace period for interest payment on US dollar debt, and the company was still actively optimizing its funding arrangements to protect the legitimate rights and interests of creditors.
As for the reasons for the suspension of payment, Country Garden Holdings said that due to the recent deterioration of sales and refinancing environment and the impact of various types of capital supervision, the company's book available funds continued to decrease, resulting in periodic liquidity pressure.
Some analysts pointed out that Country Garden Holdings is a demonstration of high-quality private housing enterprises supported by the regulatory authorities to issue bonds, and is also one of the only two private enterprises in the current 100 billion housing enterprises, which further reflects the liquidity dilemma faced by private housing enterprises. Li Yujia, chief researcher of the Housing Policy Research Center of
Guangdong Urban Planning Institute, said that the main problems of Country Garden Holdings are pessimistic expectations, asset liquidity and asset prices, and there is no high irrational diversification and high capital operation.
Li Yujia believes that the risk of Country Garden Holdings not only has a great impact on expectations, but also on the upstream and downstream industrial chain, after all, the size of the Country Garden Holdings is there. It is suggested that local state-owned financial institutions and central financial institutions (AMC, policy banks) enter the market to stabilize market expectations.
The announcement of the profit warning of the Country Garden Holdings further explains why the company, once regarded as one of the high-quality private housing enterprises by the outside world, has finally come to the present situation.
Country Garden Holdings said that since 2021, the industry has entered an unprecedented difficult period, with multiple adverse factors overlapping, resulting in severe difficulties and challenges for industry sales and open market financing.
In the context of the continuous bottom of the real estate market, the performance of most housing enterprises in the first half of this year is hard to say ideal. According to wind data, as of August 4, 68 of the 116 A-share real estate companies classified by wind industry have disclosed their first half performance forecasts, of which 38 are expected to lose money, including some state-owned enterprises.
Under the general trend of the industry, the sales of Country Garden Holdings are not optimistic. From January to July this year, the equity sales of Country Garden Holdings amounted to RMB140.8 billion, representing a year-on-year decrease of 35% and a decrease of 61% from 2021. In July, the equity sales amounted to RMB12.1 billion, representing a month-on-month decrease for the fourth consecutive month, representing a year-on-year decrease of 60% and a decrease of 78% from 2021. The difficult
sales situation will undoubtedly lead to the further deterioration of the "hematopoietic" ability of Country Garden Holdings themselves.
Faced with the extremely difficult situation of the industry as a whole, Country Garden Holdings have already started the "defense war", including making every effort to ensure the safety of the company's cash flow, minimizing expenditure, and the support of major shareholders.
At the same time, Country Garden Holdings have been guaranteeing delivery and credit.
According to the announcement, in 2022 and the first half of 2023, the Group, together with its joint ventures and associates, delivered nearly 700000 and 278000 housing units respectively, with a total expected delivery of nearly 700000 housing units in 2023.
In addition, since 2022, despite the extremely difficult financing environment, Country Garden Holdings have made every effort to arrange the repayment of principal and interest of domestic and foreign financing under the condition of continuous net outflow of financing cash flow. Andrew Lawrence, Asia property analyst at
TS Lombard, says Country Garden Holdings has been seen by many Chinese as one of the better developers but has suffered the same problems as everyone else.
The Country Garden Holdings pointed out that although the company has made every effort to save itself, the market as a whole has not yet recovered, the absolute scale of the industry has declined, it still takes time to restore confidence in the capital market, and the overall operating pressure of the company has increased, resulting in a large loss expected in the first half of 2023, especially due to the recent sales and refinancing environment. The available funds on the company's books continued to decrease, and there was a periodic liquidity pressure.
In response, the Country Garden Holdings said that the company's management had made a profound reflection, although it had predicted the current market adjustment cycle, but underestimated the depth, intensity and sustainability of the market downturn, failed to make more vigorous response measures as early as possible, failed to see that the supply-demand relationship of the real estate market has undergone significant changes, and failed to see that the real estate market has undergone significant changes. The understanding of the potential risks such as the excessive proportion of investment in the third, fourth and lower-tier cities and the insufficient speed of debt ratio drop is not deep enough, and the action to resolve them is not timely and effective enough.
In order to reverse the current predicament, the Country Garden Holdings has put forward a series of self-help measures.
The first is to go all out to ensure delivery. This is the safety bottom line of the real estate market, the most important corporate responsibility of the company, and the highly agreed goal of all employees. Through the implementation of the main responsibility, special funds, strict management of pre-sale monitoring funds and other means, the company will effectively guarantee the operation of the project nationwide and complete the task of guaranteeing the delivery of buildings, and fulfill its commitment to the owners.
Second, we should actively resolve the pressure of periodic flow. The company will communicate with investors and consider taking various debt management measures to ensure the long-term development of the company in the future and to preserve the value and interests of investors.
Third, ensure the orderly development of business. At present, the Group has sufficient net assets and sufficient land reserves. By the end of 2022, the Group's net assets amounted to approximately RMB309.6 billion and the total equity resources available amounted to approximately RMB1208.3 billion (of which the acquired equity resources available amounted to approximately RMB955.5 billion).
An industry insider said that unlike some insolvent housing enterprises, the assets in front of the Country Garden Holdings are enough to cover all interest-bearing debts, and the lack of liquidity is only a phased problem.
In order to cope with the liquidity pressure, Country Garden Holdings said that they would do their best to do a good job in sales, strive to revitalize the deposited assets of hotels, office buildings and shops, strengthen internal control, further streamline the organization, reduce administrative expe nses, improve operating efficiency, and better protect the rights and interests of suppliers, partners and other stakeholders.
Fourthly, the Country Garden Holdings will also strengthen the organization and leadership during the special period. In order to better cope with the current difficulties, the company has set up a special working group headed by Yang Huiyan, the chairman of the board of directors, to establish a working mechanism, coordinate, make efficient decisions, vigorously promote and strive to tide over the difficulties.
Although the company has encountered the greatest difficulties since its establishment, Country Garden Holdings still expressed confidence in the prospects of China's economy, and the real estate industry will eventually return to the track of healthy and stable development after this round of profound adjustment.
"The company will actively implement the spirit of the meeting of the Political Bureau of the Central Committee on July 24, shoulder the responsibility of large enterprises, and under the leadership of Party committees and governments at all levels, make full use of relevant policies such as" 31 private economy "and" 16 finance ", base itself on the current situation, coordinate resources of all parties, and spare no effort to ensure delivery and operation; In the long run, we should steadily promote various business strategies and risk mitigation measures to ensure the sustainable and healthy development of the company and safeguard the legitimate rights and interests of investors.
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