Mainland China developer Yuexiu Property sees net profit fall 59 per cent
Guangdong-based company takes a hit from yuan devaluation
Guangdong-based developer Yuexiu Property saw net profit fall 59 per cent last year due to foreign exchange losses and the decline in fair value of a commercial complex in Guangzhou.
The state-owned developer posted a core profit (excluding one-off items and fair value changes) of 1.24 billion yuan (HK$1.47 billion) in 2015, down 21.2 per cent year on year. It recorded a net profit of 10.1 billion yuan.
“We have nearly 55 per cent offshore debts and weren’t able to adjust debt structure at the first moment last August, ” chief financial officer Ou Junming told a media briefing on Monday.
Mainland China’s central bank suddenly devalued the yuan in August and it has fallen more than 5 per cent against the US dollar, bringing losses to many listed developers with large exposure to offshore debt.
Ou said the company had expanded yuan-denominated lending both onshore and offshore and aimed to narrow its foreign exchange position from last year’s HK$20 billion to HK$6 billion by the end of this year.
Yuexiu Property chairman Zhang Zhaoxing said a 790 million yuan decline in the valuation of Guangzhou Fortune World Plaza last year was a reflection on the wider economic slowdown.
The company’s revenue climbed 40.8 per cent last year to 22.1 billion yuan, while its gross profit margin fell to 21.1 per cent, from 26.4 per cent in 2014.
Zhang said the decline in gross profit margin was mainly due to the stagnant home prices in its newly entered north China market, where the economy was poor.
He said he expected Yuexiu’s gross profit margin to remain stable in the next two years given the government had issued a number of policies to prop up the sector.
Yuexiu recorded sales of 24.85 billion yuan last year, with Guangzhou city contributing 45 per cent.
“We are confident about the Guangzhou market as the city is expected to expand its population to 20 million,” Zhang said. “We will shift to buy more land in Guangzhou this year.”
He said home prices in Guangzhou were much heathier than in other first-tier cities.
The company has set this year’s sales target at 25.8 billion yuan.