On the evening of January 14th, China’s real estate giant Country Garden Holdings Co., Ltd. (referred to as “Country Garden”) released delayed financial reports for the full year of 2023 and the first half of 2024, showing a loss of approximately RMB 167.3 billion in 2023.
According to the financial reports, Country Garden achieved total revenue of around RMB 401 billion in 2023 and reported a pre-tax loss of RMB 167.3 billion. In the first half of 2024, the company recorded total revenue of about RMB 102.1 billion with a pre-tax loss of RMB 10.8 billion.
The substantial loss in 2023 was attributed by Country Garden to a large provision for inventory impairment made that year.
Country Garden stated that since 2021, the real estate market in China has gradually entered a downward cycle, with both sales volume and prices continuously declining, leading to a substantial shrinkage in asset values. To objectively reflect the impact of market changes on the company’s asset values, the company made provisions for impairments totaling around RMB 82.4 billion for properties under construction and completed properties held for sale.
Affected by macroeconomic conditions and the downturn in the real estate sector, Country Garden also faces risks of unrecoverable receivables, resulting in a net impairment loss on financial assets and financial guarantees of approximately RMB 37.2 billion. When combined with the provision for inventory impairment, these two items accounted for 71.5% of Country Garden’s pre-tax loss in 2023.
In addition, market downturn in 2023 had a significant impact on the gross profit of some of Country Garden’s projects. The credit tightening in the real estate sector due to the downturn led to a substantial reduction in credit financing for enterprises.
Just before the release of the financial reports, on January 9th, Country Garden had disclosed the interim progress of its debt restructuring. If implemented, this restructuring proposal will significantly deleverage Country Garden, aiming to reduce debt by up to $11.6 billion, extend maturity by up to 11.5 years, and lower financing costs.
Regarding the debt restructuring proposal, Netease published an article stating that it offers creditors five options, which essentially boil down to early payoff with losses or waiting longer for more money – 7 years, 9 years, or 11 years, depending on their preference.
The article mentions that if the proposal is implemented, the current overseas debt pressure on Country Garden will no longer be a significant issue. It is estimated that many creditors are currently mulling over this, as for them, the situation with Country Garden is not very different from being robbed – while the debt pressure is alleviated, their money has not returned.
Public data shows that as of the end of 2023, Country Garden’s total debt is around RMB 13.6 trillion, ranking second only to Evergrande’s RMB 23.8 trillion among real estate companies in debt.
Apart from Country Garden, the performance of China’s top 100 real estate companies in 2024 has generally seen a significant decline.
According to data released by the China Real Estate Information Corporation at the beginning of this month, from January to December 2024, the total sales of the top 100 real estate companies decreased by 30.6% year-on-year.