Country Garden's Overdue Results: A Tale of Steep Losses Amid Sector Slump

Country Garden Holdings Company Limited (02007.HK), once a leading real estate developer in China, is set to report its long-overdue 2023 full-year and 2024 interim financial results on Tuesday, January 15, 2025. The company's delayed publication of these results comes amidst a prolonged property sector crisis that has weighed heavily on its sales and financial health. Analysts expect the embattled developer to report steep losses, as a nearly 50% decline in property sales in China over the past three years has taken a significant toll on the industry.

Country Garden's financial woes have been compounded by its default on $11 billion of offshore bonds in late 2023, leading to a liquidation lawsuit and a debt restructuring proposal. The company has been working to address its liquidity crisis and restore investor confidence by proposing a debt restructuring plan that would cut its offshore debt worth $16.4 billion by 70%. However, its Hong Kong shares have been halted from trading since April 2, 2024, as the company delayed the publication of its financial results.

The real estate industry in mainland China entered a downward cycle during the second half of 2021, with the three major international rating agencies cumulatively downgrading the rating or outlook of Chinese real estate developers some 250 times. This market downturn negatively impacted Country Garden's sales and financial performance, as reflected in its net loss of 48.9 billion yuan ($6.67 billion) in the six months ended June 2023, deepening from a 6.7 billion yuan net loss in the second half of 2022.

Country Garden's financial position has been further strained by its high debt levels, with total interest-bearing debt decreasing by only 2.6% to 317.92 billion yuan (approx. US$50 billion) as of December 31, 2021. The company's net gearing ratio also decreased by 10.2 percent points YoY to 45.4%, indicating that its debt levels remain a significant concern. Additionally, Country Garden's cash flow to short-term debt ratio stood at 2.3x as of December 31, 2021, suggesting that the company has sufficient cash flow to cover its short-term debt obligations.

Despite these challenges, Country Garden has taken steps to address its liquidity crisis and restore investor confidence. In late 2023, the company proposed a debt restructuring plan to its creditors, aiming to reduce its offshore debt worth $16.4 billion by 70%. Additionally, Country Garden has been exploring the sale of its assets to raise cash and improve its liquidity position. In January 2025, it was reported that the company is seeking to sell assets worth $530 million in Guangzhou.



In conclusion, Country Garden's overdue results are expected to show steep losses amid the sector's sales slump, as the company grapples with high debt levels, cash flow issues, and a prolonged property sector crisis. However, the company has taken steps to address its liquidity crisis and restore investor confidence by proposing a debt restructuring plan and exploring asset sales. As the company works to navigate these challenges, investors will be closely watching its financial results and the progress of its debt restructuring efforts.