Overdue China Evergrande Results Will Show Huge Losses

China Evergrande Group is expected to post long overdue results – significant losses – on Monday for the years 2021 and 2022.

The world’s most indebted property developer defaulted in late 2021 and has been struggling to complete projects and repay its many suppliers and creditors.

After announcing an offshore debt restructuring plan in March, it is now garnering support to complete the process.

With about $300 billion of total liabilities, Evergrande’s debt problem has rippled through China’s property sector, a pillar of the world’s second-largest economy, leading to a string of defaults and uncompleted homes in the country.

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Business model may be broken

The market will be looking for updates on Evergrande’s liquidity and liabilities, as well as its operations and business, in the 2021 and 2022 results, Sandra Chow, co-head of Asia Pacific research at CreditSights, said.

However, a clearer picture will only emerge from the developer’s first-half 2023 performance, she added.

Companies need to publish results of the first six months of the year by the end of August, according to regulatory rules.

Charles Macgregor, head of Asia of Lucror Analytics, said he was not optimistic about Evergrande’s results. “Results are meaningless if the business model is broken,” he added.

Delisting risk after dramatic sales plunge

Analysts expect Evergrande to post steep losses for 2021 and 2022, years in which its contracted sales fell to 443 billion yuan ($61.8 billion) and 31.7 billion yuan ($4.4 billion) respectively, versus 723 billion yuan (about $101 billion) in 2020.

Creditors said they were also watching for updates on the firm’s offshore debt restructuring plan, as it has not disclosed the latest figures of creditor support after it extended the deadline for receiving an incentive to May.

Evergrande, needing more than 75% in creditor value in each debt class to pass the plan, said in April that 77% holders of class-A debts and 30% holders of class-C debts had submitted their respective support, among others.

Evergrande’s shares listed in Hong Kong have been halted from trading since March 21 last year, pending the financial results and an investigation into 13.4 billion yuan of seized deposits from a unit.

The company risks being delisted if its shares remain suspended for 18 months (until September 21).

It is unclear, however, whether the shares would resume trading on Tuesday as the company also needs to satisfy other requirements by the stock exchange, including demonstrating the firm has in place adequate internal controls and procedures to meet the obligations under the listing rules.