No earnings reprieve for Chinese developers with home sales, prices in doldrums
- Five developers tracked by broker CGS International are expected to report a 19 per cent drop in core net profit on average in the first half
Some of the nation’s biggest private home builders are likely to report an average 19 per cent drop in core net profit for the January-to-June period, according to CGS International Securities based on its forecasts on five companies, including China Vanke, Longfor Group and Greentown China Holdings.
Vanke, once China’s second largest developer by sales, last month warned investors of interim losses between 7 billion yuan (US$980 million) and 9 billion yuan. The company and its peers are due to report their earnings by the end of this month.
“Developers with liquidity issues likely continued to register losses,” said Raymond Cheng, managing director of CGS based in Hong Kong. “Profit and revenue at some state-backed developers would have fallen as well, but they remain more resilient (than other players).”
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The impending results suggest the industry turnaround remains distant, and the financial squeeze hobbling Chinese home builders will persist. China’s top 100 developers recorded 1.85 trillion yuan of home sales for the first six months this year, a 40 per cent drop from a year earlier, according to China Real Estate Information Corp.
Sales in July fell by about 20 per cent, it added, even with favourable measures unveiled by the government to halt the industry slump. Prices of new homes in 70 major cities weakened 4.9 per cent in June from a year earlier, and by 7.9 per cent in the secondary market, the statistics bureau said last month.