Country Garden overdue results set to show steep losses amid sector’s sales slump

By Clare Jim

HONG KONG (Reuters) – Country Garden (HK:), once China’s top developer and now facing a liquidation lawsuit, is expected to report steep losses when it publishes long-overdue results on Tuesday, analysts say, as a prolonged property sector crisis weighed on sales.

Country Garden delayed the publication of its 2023 full-year and 2024 interim financial reports after defaulting on $11 billion of offshore bonds in late 2023. As a result, its Hong Kong shares have been halted from trading since April 2, 2024.

The accounts will be released later on Tuesday against the backdrop of property sales in China shrinking nearly 50% over the past three years as the industry reeled from an unprecedented debt crisis that began in 2021.

The release of the overdue financial results will put the embattled developer on course to seek a resumption in trading from the Hong Kong Stock Exchange, possibly as soon as from Wednesday.

The publication of the overdue results and the resumption of stock trading are linked to Country Garden’s efforts to fend off a liquidation petition filed by a creditor in a Hong Kong court relating to its non-payment of a $205 million loan.

Guangdong province-based Country Garden said last week it has proposed to creditors a debt restructuring that would cut its offshore debt worth $16.4 billion by 70%, and it had reached an “understanding” with a lender group.

The next liquidation hearing will be held on Jan. 20.

WIDENING LOSSES

Country Garden’s expected losses follow two semi-annual losses since the second half of 2022.

It recorded a net loss of 48.9 billion yuan ($6.67 billion) in the six months ended June 2023, deepening from a 6.7 billion yuan net loss in the second half of 2022. The firm’s 2022 full-year net loss was 6.1 billion yuan, versus a 26.8 billion yuan net profit in 2021.

Country Garden’s annual sales by value dropped more than 70% last year, sending its national ranking down to No. 16 from No. 7 in 2023, according to a survey by real estate researcher CRIC, a sharp drop for a firm that was once China’s top developer by sales.

“The results will show losses for sure, the question is just how big they will be,” said Raymond (NS:) Cheng, head of China research at CGS International. “It would book large provisions after it has defaulted.”

Cheng said the market will be examining Country Garden’s debt levels in the financial statements, as well as its assets and cashflow because sales and property values both dropped significantly over that period.

($1 = 7.3303 renminbi)