June 15, 2024

China Evergrande: The company posts losses of $81 billion over two years

Hong Kong

Evergrande Group, the world’s most indebted property developer, has posted long-delayed financial results as a key part of its debt restructuring, which is shaping up to be one of the largest in Chinese corporate history.

The company reported losses attributable to shareholders of 476 billion yuan ($66 billion) and 106 billion yuan ($15 billion) for 2021 and 2022, respectively, according to Monday stock exchange filing. Combined net losses for the two years were 582 billion yuan ($81 billion).

It is the first time the group has released results since 2021, when its collapse triggered China’s worst-ever property crisis, which continues to weigh on the economy.

Shares in Evergrande have been suspended from trading since March 2022 due to the delay in releasing 2021 results.

To avoid being delisted, Evergrande had to report the results no later than September 20, as well as comply with other requirements specified by the stock exchange.

The filing also revealed that Evergrande’s total debt had reached 2.437 trillion yuan ($340 billion) by the end of last year.

That’s about 2% of China’s gross domestic product.

Meanwhile, Evergrande’s total assets were only valued at 1.838 trillion yuan ($256 billion), which means it could be insolvent.

The company’s headcount fell 17% to 102,910 by the end of last year from two years ago.

The conditions represent “material uncertainties” that could cast significant doubt on the company’s ability to continue as a going concern, he said.

Evergrande is undergoing a major debt restructuring from the end of 2021, which has been ordered by the government.

In March, the company unveiled a multi-billion dollar restructuring plan to make peace with its international creditors. But he said an additional $36 billion to $44 billion in funding was needed to resume work and deliver property projects.

Founded by Xu Jiayin in 1996, Evergrande was China’s second largest property developer by sales in 2020.

Before the crisis hit two years ago, it had more than 200,000 employees, had more than $110 billion in annual revenue and owned more than 1,300 developments in hundreds of cities.

In September 2021, the company’s cash crunch worsened amid a government crackdown on excessive lending in the real estate industry.

Policy makers wanted to limit debt risks in the economy and limit the rise in property prices.

But Evergrande’s cash problem soon turned into a crisis that led to credit downgrades and debt defaults, sending shock waves through the economy and global markets.

With the company teetering on the brink of crisis, the government stepped in and ordered a debt restructuring aimed at preventing a disorderly collapse from ravaging the economy and fueling social unrest.

Evergrande’s financial health is a concern for global investors, as the company owes thousands of US dollar-denominated debt.

Its debt restructuring could also set an important precedent for global investors dealing with similar situations involving Chinese developers.

For years, real estate has been a pillar of growth for the Chinese economy. The sector and related industries account for up to 30% of China’s GDP, employ thousands of workers and contribute a significant share of revenue to local governments.

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