After a prolonged delay of nearly 22 months, Country Garden finally released its financial reports for the entirety of 2023 and the first half of 2024 on the evening of January 14. The revealed data underscored the severity of the company's financial struggles, with a staggering net loss of 216 billion yuan over this timeframe, 200.96 billion of which was attributed to the year 2023 alone.
This immense financial setback can primarily be traced back to significant impairment provisions made by Country GardenAccording to the 2023 annual report, the firm took an impairment write-down of approximately 82.4 billion yuan related to its properties under construction and completed projects intended for saleFurthermore, concerning certain receivables, the company also recognized impairment losses totaling around 37.2 billion yuan, reflecting concerns about their recoverabilityCollectively, these provisions accounted for 71.5% of the pre-tax losses experienced by the company
In the first half of 2024, Country Garden again noted a further write-down of inventory, this time being reduced to 2.7 billion yuan.
When asked about the potential for ongoing losses in 2024, a relevant representative from Country Garden acknowledged that the market would still exhibit weakness in the first half of the yearHowever, the vast impairments recognized in 2023 have led to a significant decrease in necessary write-downs for 2024, and they anticipate that losses will drastically shrink for the year as a wholeThis optimism, albeit cautious, appears to be underscored by the potential moderating effect of these prior provisions on their future financial performance.
The representative further emphasized that while the company remains in a transitional phase focused on delivering homes and restoring its balance sheet, the timeline for returning to profitability remains uncertain
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The company is tasked with navigating external market conditions, the real estate sales recovery, the settlement of its debts, and overall operational efficiencies.
Regarding debt restructuring, the company’s reports hinted at forthcoming agreement on a viable debt restructuring plan by mid-2024. This expectation emerges in light of the continued dialogue with financial institutions and stakeholders about rehabilitating their financial obligations.
Despite the losses, Country Garden’s reports also depicted the inventory of tangible assets still held by the companyBy June 30, 2024, the company had net assets amounting to 74.056 billion yuanIt currently controls 3,059 development projects with an overall unrecognized value estimated at 604.1 billion yuan, indicating that while facing considerable losses, the firm retains substantial assets.
In terms of revenue generation, Country Garden reported earnings of 503.2 billion yuan during 2023 and the first half of 2024. Since the financial crisis in 2022, the company has managed to recoup over 60 billion yuan from difficult to sell assets, demonstrating its efforts to remedy liquidity concerns.
In addition to sales and receivables, Country Garden has sought to enhance liquidity through various measures
The reports disclosed that by the end of 2024, the company had reached cooperative agreements regarding land contracts with about 19 plots, and the consideration for these land contracts totaled approximately 2.38 billion yuan, with 1.2 billion yuan already revitalized within the same yearAs of January 9, 2025, over 200 of its projects have been approved for inclusion in a financing whitelist, generating new financing to the tune of 1.523 billion yuan, with loan extension amounts reaching 20.77 billion yuanFurthermore, since 2021, the majority stakeholder has reportedly provided cash support in the form of interest-free, unsecured loans amounting to about 9.6 billion Hong Kong dollars.
Despite these efforts, the financial condition remains precarious, with cash holdings at approximately 44.8 billion yuan but current liabilities considerably surpassing current assetsHence, Country Garden found it necessary to extend its debt obligations.
Just five days prior to the financial report publication, Country Garden unveiled its first offshore debt restructuring proposal, which it claims has garnered consensus from a committee formed by seven prominent banks
The proposed restructuring aims to reduce debt by up to 11.6 billion US dollars, extend maturity timelines for up to 11.5 years, and decrease the average borrowing cost from approximately 6% to around 2% post-restructuring.
Looking ahead, Country Garden expects to finalize its debt restructuring agreement with overseas creditors by the first half of 2025. The company has also reached preliminary consensus on the restructuring framework with its bank syndicate and plans to maintain proactive discussions with creditors to finalize the restructuring support agreements and other procedural tasks related to the issuance of new debt instruments.
As for future operations, Country Garden has revealed that its strategic focus will encompass ensuring property delivery, maintaining operational stability, and preserving credit integrityAccording to the semi-annual report for 2024, guaranteeing timely property delivery stands as the company's primary short-term objective
The firm indicated that it has thus far delivered over 380,000 residential units in 2024 alone, complementing a total delivery of around 1.7 million units over the past three years.
With the delivery process seen as uniquely challenging, representatives from the company shared insights into their strategies to manage cash flows effectivelyBy negotiating payment plans with primary contractors and suppliers, Country Garden seeks to ensure alignment on project timelines and settlement arrangements, thereby safeguarding operational continuityMoreover, leveraging state and local government support schemes, including land recovery and project whitelist initiatives, the company aims to facilitate timely completions of its commitments.
On the operational front, it is emphasized that the company is actively adjusting its organizational structure to align with market shifts while controlling overhead expenditures