Author: Sun Mengfan Zhang Huimin

　　The rare scene where real estate companies collectively encounter performance "Waterloo" will appear in 2022.

　　With the advent of the mid-year report disclosure period, real estate companies have released performance forecasts intensively, but looking ahead, there are only a handful of companies that are still growing, huge losses of billions and plummeting profits have become the norm in the industry.

According to incomplete statistics, there have been more than 50 real estate companies with pre-loss performance in the first half of the year, and it is not better to have no losses. Leading companies have also encountered profit "black swans".

　　CCRE Real Estate, Zhengrong Real Estate, Tahoe Group, Blu-ray Development, Jinke Co., Ltd., Sunshine City... The real estate companies that have experienced debt crisis in this round have inevitably slipped into the abyss of losses; Enterprises such as Country Garden, Greenland Holdings, and China Merchants Shekou have also experienced sharp declines in profits one after another.

　　If it is said that "increasing income without increasing profits" and the decline in profit margins have been the norm in the real estate industry before, and now the performance of real estate companies is showing waterloo in batches, there are some special reasons that are affected by the current industry environment.

For example, the scale of settlement has dropped sharply due to sluggish sales, the scale of asset impairment provision has increased, foreign exchange fluctuations have caused exchange losses, and the capitalization of interest has decreased due to shutdowns.

　　This is no longer a question of whether a company is operating well or not, but a common dilemma faced by real estate companies today.

Real estate companies’ debts are overwhelmed and funds are tight, like the fluttering wings of butterflies, which not only reduces the confidence of home buyers, but also slows down the construction progress and affects the scale of delivery. In the end, the pressure of debt repayment will continue to increase for housing companies that “can’t make ends meet”.

　　Mo Bin, President of Country Garden, said at an investor meeting recently that the market downturn has been longer than expected, and it is still in a downturn from June last year to the present.

With the successive efforts of monetary policy, relaxation of regulation, and measures to ensure the handover of buildings, can these real estate companies wait for the day when they will come to light?

The half-year loss can exceed 5 billion at most

　　The performance in 2021 is still "difficult to give birth" for real estate companies so far. The new quarter's interim report is here again. Judging from the published data, the current survival situation of real estate companies is not optimistic.

　　In the list of losses, there are real estate companies that have "exploded", and there are companies that have not yet defaulted.

Among them, Jianye Real Estate, which has introduced Henan state-owned assets into shares, has the largest loss. It is expected to record a loss attributable to equity holders of 5 billion to 6 billion yuan during the period, while the company recorded a loss of 729 million yuan in the same period last year. Someone is attributable to the profits.

　　Jianye explained that the losses were mainly attributable to: the continuous downturn in the real estate industry and the year-on-year decline in sales; the impact of the new crown epidemic led to the delay of construction progress, the decline in the volume of deliveries during the year, and the reduction in carry-over income; the decline in commercial leasing demand and the decrease in the fair value appreciation of investment properties ; The average selling price of delivered properties decreased, and the gross profit margin decreased; the impairment of inventory in the period increased.

　　Blu-ray Development, which has an equally astonishing loss scale, will lose more than 10 billion yuan in 2021. In the first half of this year, it is again estimated that the net profit loss attributable to shareholders of listed companies is 4.6 billion yuan, and the net profit loss attributable to shareholders of listed companies after deducting non-recurring gains and losses About 4.3 billion yuan, the net assets attributable to shareholders of listed companies in the first half of 2022 are expected to be negative.

　　Sunshine City, a real estate company that has been out of danger, suffered its first semi-annual loss after a net loss of nearly 7 billion yuan last year. It is estimated that the net profit attributable to shareholders of listed companies in the first half of the year was 3.5-4.5 billion yuan, and the profit in the same period last year was 1.99 billion yuan. .

Zhengrong Real Estate, which had a net profit of 809 million yuan attributable to its parent last year, is expected to lose 2.5 billion to 3 billion yuan attributable to owners of the parent company in the first half of the year.

　　Zhongtian Finance, which is mainly engaged in first-class real estate development, is expected to lose 2.2 billion to 3.5 billion yuan in the first half of the year; Hebei real estate company Rongsheng Development is expected to lose 1.8 billion to 2.4 billion in net profit attributable to shareholders of listed companies in the first half of the year.

At the same time, real estate companies such as Jinke Co., Ltd., Shoukai Co., Ltd., Tahoe Group, Zhongnan Construction, and Tianyu Real Estate have all suffered losses of more than one billion yuan in net profit.

　　Sino-Ocean Group, a state-owned real estate company, also rarely suffered a performance decline.

According to the group's unaudited financial data, in the first half of the year, its turnover was about 23.412 billion yuan, with a profit of 108 million yuan during the period, other comprehensive losses of 988 million yuan, and a total loss of 880 million yuan; as of the end of the interim, the group's total assets were 264.001 billion yuan RMB 192.254 billion in total liabilities.

　　Real estate companies that did not fall into a loss-making situation, the profit data is not optimistic.

Country Garden, a “universal real estate company”, issued an announcement stating that the company’s core net profit in the first half of the year is expected to be 4.5 billion to 5 billion yuan, and the profit attributable to shareholders is 200 million to 1 billion yuan. Earnings have fallen sharply this year.

　　China Merchants Shekou, a leading real estate company, estimates that the net profit attributable to shareholders of listed companies in the first half of 2022 will be 1.5 billion to 2.1 billion yuan, a year-on-year decrease of 50.60%-64.71%; Greenland Holdings' net profit attributable to its parent in the first half of the year is 4.201 billion yuan, a year-on-year decrease of 4.201 billion yuan. The decline also reached 48.98%, deducting non-net profit of 4.377 billion yuan, a year-on-year decrease of 43.8%.

　　In addition, many large-scale real estate companies such as CIFI Holdings, Times China, Agile, Yuzhou Group, Zhongliang Holdings, and KWG have all recorded performance declines to varying degrees. Among them, Yuzhou Group and Times China’s net profit fell by more than 90%, KWG’s net profit fell by more than 80%, and Zhongliang Holdings’ net profit fell by more than 60%.

　　Real estate enterprises that can maintain positive growth in performance, or a few state-owned enterprises with stable operations, or record positive growth due to their small base.

The sales scale has rushed to the second Poly Development. It is expected that the revenue in the first half of the year will increase by 23.19% year-on-year to 110.847 billion yuan, the operating profit will be 19.172 billion yuan, and the net profit attributable to shareholders of the listed company will increase by 4.1% year-on-year to 10.721 billion yuan.

Markdowns affect profits

　　As a leading company in the industry, Country Garden has also experienced a sharp decline in profit, and the reasons behind it are worth pondering.

　　The decline in sales performance and delivery scale is the main reason for the profitability of real estate companies.

At the investor meeting held on August 18, Country Garden President Mo Binbiao mentioned that in the first half of this year, affected by the restrictive measures of the epidemic, Country Garden’s delivery scale decreased, which slowed down the progress of project settlement, resulting in a decline in revenue and affected Settlement gross profit and profit scale.

　　At the same time, since the process of clearing risks in the industry has not yet ended, in order to ensure the balance of cash flow, Country Garden has some arrangements for the balance of volume and price of late-market assets and assets to be cleared in some areas, which has caused great pressure on gross profit.

　　Among the reasons given by other real estate companies, the drop in the average sales price has also been mentioned many times, which has become an important factor affecting the current profit.

Rongsheng Development stated that during the reporting period, in order to promote payment collection, some of the company's projects achieved project deconversion through a certain degree of price-to-volume exchange. Under the industry trend of downward pressure on profit margins, the decline in gross profit margins aggravated.

　　Redsun Properties also stated that the factors that caused the loss in performance included that, due to the impact of the new crown, the sales price of the group's development projects was lower than expected.

Jinke Real Estate said that the overall sales of the industry fell sharply. In order to stimulate sales, the company took measures such as price reductions and special destocking, resulting in a decrease in gross profit margin and an increase in sales expenses.

　　According to statistics from the China Index Research Institute, China Business News found that in the first half of 2022, among the top 20 real estate companies in terms of sales, 12 of the top 20 real estate companies saw their average sales prices fall to varying degrees, and the average sales prices of the other 8 rose.

　　The 12 real estate companies whose average selling price fell include Country Garden, Poly Development, China Overseas Properties, Greentown China, Sunac China, Longfor Group, Greenland Holdings, Seazen Holdings, CIFI Group, Yuexiu Property, Jinke Group, and Shimao Group.

The 8 real estate companies whose average selling price has risen include Vanke, China Resources Land, China Merchants Shekou, Gemdale Group, China Jinmao, and Binjiang Group.

　　Among them, there are four real estate companies that have reduced their prices by more than 10%, namely Country Garden, which fell by 15.6%, Greentown China, which fell by 10.2%, Greenland Holdings, which fell by 11.7%, and Jinke Group, which fell the most, at 21.9%.

In the first half of 2022, Country Garden and Jinke Group, which have experienced a larger decline, have an average sales price of 8,127 yuan per square meter and 7,781 yuan per square meter, both below 10,000 yuan per square meter.

　　Since 2018, the profit growth rate of the real estate industry has shown a downward trend. With the high land price projects entering the settlement period, the scale of corporate profits has experienced negative growth.

Today, real estate companies are vigorously reducing prices and selling, and the overall profit margin of the industry is under pressure again.

　　Not only that, due to the decline in the average price of properties on sale and the continued sluggish industry situation, many housing companies have increased inventories for falling prices, which has a greater impact on net profit.

Mo Bin said that due to the principle of prudence, Country Garden's provision for impairment of property projects increased during the period; Shangkun Real Estate said that due to the impact of the epidemic and the market environment, the average selling price of property projects fell, resulting in an increase in inventory impairment provisions.

　　Kerui said that in recent years, affected by the industry consolidation and the epidemic, housing companies have accelerated their "shrinking balance sheets", and asset impairment provision is common, which has lowered the level of net profit to a certain extent, and has even become the main cause of losses for some companies. The impact cannot be ignored.

From the perspective of the composition of asset impairment provisions, inventory depreciation losses accounted for the most important.

　　The agency believes that after a period of rapid growth, there are not a few companies with "falsely high" assets. As the industry returns to rationality, the "pain" of asset impairment losses for housing companies may be inevitable.

But in the long run, the "slim down" of assets is also a signal that the industry is returning to rationality.

　　It is worth noting that, in addition to the two major reasons of the decline in delivery scale and asset impairment, the suspension of work affects the capitalization of interest and foreign exchange losses, and also has a greater impact on the current performance of real estate companies.

　　Blue Light Development stated that due to the impact of the abnormal shutdown of some projects, according to the accounting standards, the interest expenses that no longer meet the capitalization are included in the current profit and loss, and the expensed interest expenses in the current period are relatively large.

At the same time, due to the impact of the decline in the exchange rate of RMB against the U.S. dollar, the company's dollar bonds incurred an exchange loss of about 250 million yuan.

　　Tahoe said that during the reporting period, due to the depreciation of RMB against the US dollar, foreign currency loans and interests denominated in US dollars held by Tahoe incurred an exchange loss of about 553 million yuan, compared with an exchange gain of 100 million yuan in the same period last year.

In addition, some real estate projects of the company were delivered during the period, but due to the increase in cost due to the extension of the project construction period, a small loss was incurred.

　　At present, the growth of sales and profit scale is no longer the primary indicator pursued by real estate companies. How to stabilize cash flow and "survive" is the essence of survival.

Mo Bin said that in the process of market downturn and market bottoming, the most important thing is to focus on cash flow.

Do a good job in the balance of the balance sheet and the income statement to ensure that the company can survive and live until a healthy market arrives.

　　Dongxing Securities said that the Ministry of Housing and Urban-Rural Development, the Ministry of Finance, the Central Bank and other relevant departments have recently introduced measures to support the construction and delivery of residential projects that have been sold and are overdue and difficult to deliver through special loans from policy banks.

Under the guidance of "using enough and making good use of the policy toolbox", the policy is expected to enter a new round of release period, and the strength of bailouts and demand stimulation will be further strengthened.