China’s real estate developer Three D Holdings Limited (China Three D) recently announced that due to the inability to find an accounting firm for auditing, the company may delay the release of its 2024 annual performance report.
On February 5th, China Three D stated in a report that they are in communication with multiple accounting firms to fill the vacancy of their auditor position. However, due to the current situation in China’s real estate sector, real estate enterprises are considered “high-risk clients,” and “accounting firms are generally reluctant to accept Chinese real estate developers as new clients.”
The report indicated that as they have not yet found an accounting firm to “accept the order”, “the release of the 2024 annual performance is expected to be delayed.”
According to a report by “Caixin” on February 7th, on December 4, 2024, Deloitte China resigned from its role as the auditor for China Three D due to a disagreement over the audit fee reduction proposal for the 2024 fiscal year, as well as unpaid agreed-upon procedural service fees up to June 30, 2024. Deloitte’s resignation letter expressed concerns that these unresolved issues could affect its audit independence and raise doubts about China Three D’s ability to pay.
On the same day, China Three D also announced the formal resignation of Deloitte China.
Public records show that China Three D Holdings Limited is headquartered in Shanghai, primarily engaged in real estate development and quality asset management. The company has consistently ranked among the top 100 real estate developers in China for multiple years, holds a national first-class qualification for real estate development, and was listed on the Hong Kong stock exchange in 2013.
In recent years, China Three D’s net profit has been continuously declining, with a loss recorded in 2023 after experiencing profits from 2020 to 2022. From 2020 to 2023, the company’s net profits were 421 million yuan, 170 million yuan, 42.103 million yuan, and a loss of 465 million yuan, respectively, showing a year-on-year decline of 59.62%, 75.23%, and 1148.45%, indicating a continuous and increasing decline in net profits.
Regarding the reasons for the continuous decline in performance, China Three D stated in their 2023 report that the subdued real estate market had affected the company’s contract sales and total contracted sales floor area during the reporting period, resulting in a decrease compared to the previous year.
In 2024, there were no signs of improvement in the company’s performance. As of June 30, 2024, the company’s total operating income was 193 million yuan, down 86.5% year-on-year; the net loss attributable to the parent company was 290 million yuan, a decrease of 452.2% year-on-year.
While profits were declining, China Three D’s financial situation was also under strain. According to the mid-year report for 2024, the company’s total current assets amounted to 12.969 billion yuan, with inventory accounting for 11.075 billion yuan, cash and cash equivalents amounting to only 2.68 billion yuan, and accounts receivable at 1.08 billion yuan. The total current liabilities of the company stood at 16.449 billion yuan, with other short-term liabilities and short-term debt at 9.901 billion yuan and 5.754 billion yuan respectively, and accounts payable at 794 million yuan. This indicates a tight financial situation for the company, with current assets lower than current liabilities, facing significant debt repayment pressure.