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Country Garden issues initial-half profit warning amid impairment on property schemes and declining real estate margins

August 15, 2023: On Friday, Country Garden issued an initial-half profit warning amid impairment on property schemes and declining real estate margins.

The stock decreased to an intraday low of 90 Hong Kong cents, extending the company’s losing streak after eight sessions of losses in the past nine days. This included a 14.3% descent on August 8.

The sell-off in Country Garden shares also spilled to the broader property sector.

The broader Hang Seng Mainland Property Index was 1.49% lower in afternoon trade on Thursday. Stakes of double Longfor Group were down 1.9%, while China Resources Land experienced its shares slide about 1%.

In a report to the Hong Kong exchange, the company expects a record net loss of about 45 billion yuan to 55 billion yuan for the six months ending June. That matched with the 1.91-billion-yuan profit for the same period last year.

Country Garden said it’s “mainly due to the decrease in the total profit margin of the real estate firm and the increase in impairment of property projects as a result of the plunge in sales in the real estate industry.”

Expected foreign exchange losses also contributed to the drop in net income, it said.

Attributable sales from January to July are estimated at 140.8 billion yuan, a yearly decrease of 35% and a 61% drop compared to the same period in 2021.

Earlier this week, Country Garden experienced a sell-off after reports stated the real estate firm had missed two bond coupon payments totaling $22 million over the weekend.

An investor relations representative for Country Garden did not prohibit the media reports but did not clarify the company’s compensation plans, according to Sandra Chow, co-head of Asia Pacific Research for CreditSights, a unit of Fitch Group.

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