Country Garden Delays Annual Results as Chinese Developers Report More Losses

Country Garden, China’s largest private property developer, has delayed the publication of its 2023 financial results, citing the need to collect more information to make appropriate accounting estimates and judgments.

In a filing to the Hong Kong Stock Exchange on Thursday, the embattled builder said it needs more time to assess its current and future financial resources and obligations amid a complex operating environment, and will continue to work closely with its auditor, PricewaterhouseCoopers, to publish the results “as soon as practicable”.

“Due to the continuous volatility of the industry, the operating environment the Group is confronting is becoming increasingly complex. The Company needs to collect more information to make appropriate accounting estimates and judgments, and reasonably reflect changes in the industry and the Company in the consolidated financial statements of the Group for the year ended 31 December 2023,” Country Garden said in the filing.

Country Garden also expects trading of its HKEX-listed shares to be suspended from 2 April, when the Hong Kong market reopens after Easter, as a result of missing the 31 March publication deadline as required under Rule 13.50 of the listing rules.

Debt Restructuring Continues

Foshan-based Country Garden, which earlier this month missed a RMB 96 million ($13.3 million) coupon payment on onshore borrowings after defaulting on $11 billion in offshore bonds in October, said it remains in dialogue with creditors amid its ongoing debt restructuring.

“Over the past few months, the Company has been working with its financial advisors and legal advisors to evaluate the Group’s position and formulate debt restructuring solutions to alleviate the current liquidity issue,” Country Garden said in the filing. “As at the date of this announcement, the Company’s work with its financial advisors and legal advisors is still ongoing. The Company has also actively engaged in constructive dialogue with its creditors and, while respecting the existing legal status and ranking in right of payment of all creditors, expedited the formulation of a consensual restructuring solution.”

Last month, the developer was hit with a winding-up petition in Hong Kong filed by a unit of Kingboard Holdings, due to non-repayment of a term loan worth HK$1.6 billion ($204 million) including accrued interest.

With the hearing of the winding-up case set for 17 May at Hong Kong’s High Court, Country Garden has reportedly hired New York-based advisory firm Kroll to conduct a liquidation analysis of the company to assess potential recovery rates for creditors.

Losses Pile Up

Country Garden’s results postponement comes as at least 27 HKEX-listed mainland developers announced 2023 financial results this week, with 19 of those builders reporting losses which collectively totaled RMB 191 billion. A majority of the builders which managed to maintain profitability saw their bottom lines plunge amid China’s protracted property slump.

Shenzhen-based China Vanke, China’s second largest builder by sales last year according to CRIC, saw its 2023 net profit slide 46 percent to RMB 12.1 billion, according to the company’s results announced Thursday. Earlier this month, Moody’s, S&P and Fitch all downgraded their credit ratings for Vanke amid concerns over plunging revenue, access to funding and weakened liquidity position.

“The downgrade reflects China Vanke’s weakened sales performance, while capital market volatility has curtailed its funding access. We believe these factors could lead to a sustained deterioration in financial flexibility amid upcoming maturities,” Fitch said in a statement last week after adjusting Vanke’s long term foreign currency issuer default rating to BB+ from BBB. “Continued weakness in the industry or the company’s sales performance could weaken China Vanke’s liquidity buffer.”

Among last year’s loss-making developers, Sino-Ocean Group, Shimao Group, R&F Properties and Kaisa Group took the biggest hits to bottom lines with losses of around RMB 20 billion each, while KWG Group doubled its 2022 loss to RMB 18.7 billion.

Agile Property, China Aoyuan, CIFI Holdings, Sunac China, Logan Group, Fantasia Holdings, Glorious Property, Zhenro Properties and Overseas Chinese Town (Asia) all remained unprofitable in 2023, building on losses in 2022, while China Jinmao, Soho China, Powerlong Real Estate, China South City Holdings and China SCE Property swung into the red last year.

State-backed China Resources Land and China Overseas Land & Investment (COLI) outperformed their private peers, with China Resources Land boosting its 2023 net profit 11.7 percent to RMB 31.4 billion, while COLI grew its bottom line by 10.1 percent to RMB 25.6 billion over the same period.