China's Top Developer Hit by 90% Plunge in Core Profit

Country Garden Holdings – China’s biggest property developer – has posted a record net loss of 6.1 billion yuan ($887 million), its first in 16 years.

The group said on Thursday its core profit plummeted 90% in 2022 amid the country’s property market debt crisis.

Country Garden said core profit, which excludes changes in the value of assets and financial instruments and foreign exchange, was 2.6 billion yuan ($377.36 million), down from 26.9 billion yuan the previous year.

The 6.1 billion net loss is a dramatic reversal from 26.8 billion yuan in net profit in 2021.

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Sector ‘still under great strain’

Country Garden, which was founded in 1992, was listed 138th in the Fortune Global 500 list in 2022 of the world’s top corporations, measured by revenue.

The group had flagged the disappointing results earlier this month, citing a drop in gross profit margin, a rise in provisions for impairments on property projects and net foreign exchange losses.

Property firms in China have struggled to complete projects and sell new houses in a sector hit by a debt crisis since mid-2021.

Many Chinese developers have so far posted a drop in core profit or a loss for their 2022 results, while a few state-backed peers fared better and recorded a rise.

Shares of Country Garden reversed losses after the earnings results, gaining 0.5% as of 0555 GMT. The Hang Seng Mainland Properties Index rose 0.7%.

In Thursday filing, the developer described 2022 as “a harsh winter” for the sector but said the market had bottomed out and was poised for a recovery as favourable economic policies restored industry confidence.

“However, Country Garden has to keep clear-headed because the market will not recover overnight,” it said. “The property sector is still under great strain.”

Its total interest-bearing debts fell 15% to 271.3 billion yuan and its net gearing ratio was 40%, down 5.4 percentage points from end-2021.

The developer said it was determined to transform itself into a high-tech enterprise in the future by developing construction robots and a tech-enabled construction business.