Debt-stricken Sino-Ocean warns of hefty losses amid plunge in home sales as turnaround eludes Chinese developers

Losses are likely to be between 20 billion yuan (US$2.8 billion) and 23 billion yuan for 2023, versus a 19 billion yuan deficit in 2022

Home sales fell 76 per cent in the first two months this year, after suffering a 50 per cent slump in 2023, according to company data

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An aerial view of a residential project in Hangzhou in eastern Zhejiang province on March 15, 2024. Photo: AFP

Published: 4:07pm, 19 Mar 2024Updated: 5:50pm, 19 Mar 2024

Debt-stricken Chinese developer Sino-Ocean Group said it is likely to report another year of hefty losses in 2023 as home sales in mainland China plunged, signalling no immediate turnaround in the nation’s three-year industry slump.

The firm expects to incur a loss of 20 billion yuan (US$2.8 billion) to 23 billion yuan for the year ended December 31, according to a Hong Kong stock exchange filing on Tuesday. Losses in 2022 are expected to be restated to 19 billion yuan from its previously reported 15.9 billion yuan.

The profit warning came as home builders struggled to overcome weak sales as consumer confidence cracked amid concerns about a credit crunch plaguing even some of the strongest players. Developers including China Vanke and Country Garden Holdings have sought more funds and state backing to help repay creditors as more debt matures.

A man rides an electric bike past a residential project in Beijing in June 2023. AP Photo

China imposed its “three red lines” in August 2020 to curb excessive leverage among the nation’s indebted developers in a move to stem a systemic crisis. The move shut many out of the capital markets, triggering a liquidity squeeze. Chinese home builders have defaulted on more than US$160 billion of junk-rated bonds since 2020, according to Goldman Sachs.

Shares of Sino-Ocean fell 4.9 per cent to HK$0.29 at the close in Hong Kong. The stock has lost 31 per cent of its market value so far this year.

The Beijing-based developer blamed the slowdown in the overall real estate market for its losses as profit margins narrowed and provisions for impairment of property projects increased, Tuesday’s filing showed.

Contracted sales in the first two months this year amounted to 2 billion yuan, versus 8.4 billion yuan in the same period last year, according to the company. They fell by half to 50.5 billion yuan in 2023 and by 26 per cent to 100.3 billion yuan in 2022.