China’s biggest property developer Country Garden Holdings Co. warned that it may have recorded its first full-year loss in at least 16 years, underscoring the plight of the nation’s builders.
(Bloomberg) — China’s biggest property developer Country Garden Holdings Co. warned that it may have recorded its first full-year loss in at least 16 years, underscoring the plight of the nation’s builders.
The Foshan-based company warned of a preliminary net loss of about 5.5 billion yuan ($800 million) to 7.5 billion yuan in 2022. That would be its first full-year loss since its listing in Hong Kong in 2007. The company saw declines in gross margin, rising impairment for property projects, and net foreign exchange losses.
The developer’s Hong Kong shares dropped as much as 5.5% in morning trading, extending the decline this year to about 21%.
Once considered a safer bet among Chinese developers, Country Garden has been engulfed by the sector’s record downturn. Early signs of recovery have finally emerged after sweeping policies to aid the sector late last year, leading to the halt of a 16-month home-price decline in January.
“Country Garden might face persistent earnings pressure following the warning,” Bloomberg Intelligence analyst Kristy Hung estimated in a Monday note. As the country’s only large developer with a lower-end market push, it faces risks of a “margin squeeze” this year if it struggles to raise sell-through rates in low-tier cities.
The company’s contracted sales in the first two months fell 32% from a low base the year before. Its average selling price declined to 7,356 yuan per square meter in the period, compared with 8,031 yuan last year.
In a sign of progress, the developer said it has entered into a strategic cooperation agreement with dozens of banks and is supported by a credit line of more than 300 billion yuan.
Preliminary core profit for the year, which adjusts for items including property revaluations, was about 1 billion yuan to 3 billion yuan, the builder said.
(Updates with more details about firm’s earnings, share moves)
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