On December 9th, Chinese construction waterproofing materials company, Oriental Yuhong, announced its plan to sell a four-story commercial property located in Changping District, Beijing for approximately 101.1 million RMB. The property was purchased in January of the same year for around 26.81 million RMB. Selling it for about 16 million RMB less than the original purchase price within less than a year.
This asset sale by Oriental Yuhong is said to be necessary for operational and asset structural adjustments. Taking into account the overall trends of the real estate market, housing market demands, price conditions, and negotiations with the counterparty, the company finalized the transaction price. Although a certain loss is expected from this transaction, the company believes it aligns with the current market disposition of assets.
Public information reveals that this is the third time this year that Oriental Yuhong has disclosed the sale of real estate assets. On November 13th, the company announced the sale of partial commercial and office properties in Miyun District, Beijing, and Shangcheng District, Hangzhou, involving a total of 24 properties.
In late October, Oriental Yuhong also disclosed the sale of two sets of real estate within an office building on Yingze Road in Beijing, with a total transaction price of around 23.13 million RMB. The original purchase cost of these two assets was about 50.62 million RMB.
Oriental Yuhong stated that the multiple real estate asset sales this year are expected to have a significant impact on the company’s financial performance. It is anticipated that the losses generated from asset sales throughout the year may exceed half of its most recent disclosed annual net profit.
On December 13th, prominent financial and tax expert Liu Zhigeng told a reporter from “Huaxia Times” that due to the downward impact on Oriental Yuhong’s core business in the real estate industry and significant pressure on accounts receivable, it is necessary to optimize asset structures, revitalize assets, and recover funds by disposing of non-core assets to improve cash flow. This will help alleviate financial pressure and concentrate resources on developing core business areas.
Using the pen name “Zhaiming Information Center,” the author commented on China’s website that Oriental Yuhong’s frequent discounted property disposals, where a property loses around 16 million RMB in less than a year, sends a signal of survival by “cashing out” on properties.
As a leading company in the field of construction waterproofing materials in China, the author believes that Oriental Yuhong’s business performance is closely tied to real estate construction activities. By choosing to sell properties in first-tier and core cities such as Beijing and Hangzhou at a discount at this stage, it shows a relatively cautious attitude towards short-term price rebounds in commercial real estate. It also reflects the management’s desire to reduce reliance on real estate market fluctuations within the asset structure. By speeding up the realization of non-core assets, Oriental Yuhong is attempting to enhance its cash flow and redirect more resources into its main business areas such as production, research and development, sales, and service network construction in waterproof building materials to strengthen its long-term competitiveness.
Data shows that in the first three quarters of this year, Oriental Yuhong’s operating income was 20.601 billion RMB, a decrease of 5.06% year-on-year, and the net profit attributable to shareholders of listed companies was 810 million RMB, a decrease of 36.61% year-on-year.