Longfor H1 Profit Edges Up 0.6% as Q1 Strength Outweighs Recent Slide

Longfor Group Holdings said its first-half core profit rose 0.6 percent year-on-year to RMB 6.6 billion ($910 million), as one of China’s biggest developers escaped the first half with a profit, thanks to a strong first quarter.

While revenue fell nearly 35 percent year-on-year to RMB 62 billion, the decline was offset by a similar drop in cost of sales, Longfor said Friday in a filing with the Hong Kong stock exchange.

Chairman Chen Xuping credited “conservative, prudent, and highly disciplined financial management” — including a debt-cutting plan launched three years ago — for helping Longfor maintain strategic advantages as the mainland property crisis drags on.

While the firm has maintained profitability and avoided bond defaults, its operating statistics show that Longfor is not immune from China’s declining housing market, with the developer’s contracted sales performance having fallen below 2022 levels in each of the last three months.

Keeping Pace

Beijing-based Longfor — which last year ranked as China’s eighth-largest developer by contracted sales (second among private developers, behind the now-embattled Country Garden) — on Friday reported that contracted sales in the first half of 2023 rose 14.8 percent year-on-year to RMB 98.5 billion. The group’s contracted sales in 2022 totalled RMB 126.7 billion. Those figures updated Longfor’s monthly operating statements, which had pegged its total contracted sales in the first half at RMB 65.64 billion.

“We have flexibly maintained a balance between sales volume and price, construction progress, and sales pace in a fluctuating market, ensuring stable cash returns for the group,” Chen said.

Longfor sold total gross floor area in the six-month period of 5.8 million square metres (62.4 million square feet), up 11.5 percent from year-earlier levels, with an average selling price of RMB 16,987 per square metre.

The Yangtze River Delta region accounted for 29.5 percent of first-half contracted sales, followed by western China (26.4 percent), the Pan Bohai Rim (22.7 percent), southern China (12.3 percent) and central China (9.1 percent).

In the group’s investment property operation, rental income (excluding tax) at shopping malls rose 6.4 percent year-on-year to RMB 5 billion in the January-June period, with five new malls launched as scheduled during those six months.

Favoured Developers Falter

Longfor was one of several firms tabbed as “good quality” developers by China’s government late last year, along with CIFI Holdings and Country Garden — the latter having since warned of a possible $7.7 billion first-half loss as it struggles to repay debt amid plunging sales.

Sources told Reuters last December that China had ordered its top four state-owned banks to issue offshore loans to help the select group of builders repay overseas debt. Despite that support, Country Garden now appears headed for restructuring and CIFI Holdings is still in talks with creditors about restructuring its $6.85 billion in offshore debt after defaulting on bonds late last year.

While, based on its monthly operating statistics, Longfor achieved RMB 33.6 billion in contracted sales in the first quarter of this year — up nearly 40 percent from a year earlier — its sales in the May-to-July period were down by more than 23 percent from the same three months in the previous year. Sales by China’s 100 largest developers fell by 33 percent in July from the same month last year, according to a China Real Estate Information Corp report.

Longfor’s contracts were in line with that national trend, with the company suffering a drop of more than 32 percent in July, according to a Mingtiandi analysis of Longfor’s operating statistics. That is still significantly stronger than Country Garden, which saw a 54 percent decline in contracted sales in June, followed by a nearly 60 percent drop in July.

Longfor’s billionaire founder, Wu Yajun, stepped down as chairwoman in October of last year, citing age and health reasons. Chen, who first joined the company in 2008 and rose from construction manager to executive director and CEO, subsequently took over as chairman.