Top Chinese property developer Country Garden Holdings which has developments in Malaysia as well said it expected to post its first net loss since listing in 2007 due to a sluggish property market and flagged a worse-than-feared drop in core profit.
China’s top homebuilder by sales was the latest in a growing list of developers that have warned they would report a loss or drop in profit for 2022 after being hit last year by a debt crisis and COVID-19 lockdowns that delayed or halted home-building.
Country Garden said in a filing its estimated net loss would be between 5.5 billion yuan to 7.5 billion yuan (US$799 million to US$1.09 billion), down from a 26.8 billion yuan profit in 2021.
It attributed the big loss to a drop in gross profit margin, a rise in provisions for impairments on property projects, and net foreign exchange losses it expected to report.
“The board is of the view that the above factors which affected profit are mainly in non-cash nature,” said Country Garden, adding its net debt ratio had long remained low and the company maintained a good credit record.
It said core net profit was expected to be in the range of 1 billion yuan to 3 billion yuan, still positive but down sharply from 26.9 billion yuan in 2021 and well below analysts’ forecasts for a core profit of around 9.3 billion yuan, according to SmartEstimate.
Smaller developer Logan Group Co Ltd also said it expected to record a net loss of 7 billion yuan to 9 billion yuan in 2022.
Shares of Country Garden fell as much as 5.5 percent in early trade but improved to trade down 1.8 percent by noon, while Logan fell 3.2 percent, underperforming a 0.3 percent drop in the Hang Seng Mainland Properties Index.
The profit warnings followed similar flags from peers CIFI Holdings and the property management unit of state-backed Greentown China, Greentown Service Group, on Friday.
“We expect to see more profit warnings for both China property and property management ahead,” said Raymond Cheng, head of China research at CGS-CIMB Securities Ltd.
He said results for the sector would vary, with state-owned or quality private firms set to report between a 15 percent drop and a 20 percent gain in core profit, while troubled developers’ profits would fall at least 50 percent or slide to losses.
Source: Reuters
