Country Garden issues first-half profit warning amid impairment on property projects and declining real estate margins
- The Chinese property developer expects to record a net loss ranging between 45 billion and 55 billion yuan in first half
- Country Garden says ‘industry has entered an unprecedented difficult period with multiple unfavourable factors’
Country Garden Holdings, one of China’s biggest property developers by sales, has warned of a large net loss in the first half due to impairment on property projects and declining profit margins in its real estate business.
The Chinese property developer expects to record a net loss ranging between 45 billion yuan (US$6.25 billion) and 55 billion yuan for the first six months of 2023, swinging from a net profit of around 1.91 billion yuan in the same period last year, according to a late filing to the Hong Kong stock exchange on Thursday.
Country Garden’s shares fell as much as 14.4 per cent to a record low on Friday following the profit warning. It is poised to close under HK$1 for the first time since its listing in the city in 2007.
“The expected net loss is mainly due to a decrease in gross profit margin at the real estate business and the increase in impairment on property projects as a result of a decline in sales in the real estate industry, as well as expected foreign exchange losses resulting from exchange fluctuations,” Country Garden said in the filing.
“Since 2021, the industry has entered an unprecedented difficult period with multiple unfavourable factors, resulting in severe difficulties and challenges for industry sales and open market financing,” it said.
“In particular, due to the recent deterioration of sales and refinancing environment, available funds in the book of the company have been continuously reduced, resulting in phased liquidity pressure.”