China’s leading real estate company Vanke is expected to suffer a huge loss of 9 billion yuan in the first half of the year.
On the evening of July 9th, Vanke disclosed its performance forecast, expecting a net profit loss of 7 to 9 billion yuan in the first half of the year, a year-on-year decrease of 171% to 191%; after deducting non-recurring items, the net loss is expected to be between 5 to 6.5 billion yuan, a year-on-year decrease of 157% to 175%.
According to the mainland media “Caijing”, compared to the first quarter, Vanke’s losses are expanding. In the first quarter, Vanke’s net loss was about 360 million yuan, turning from profit to loss. Based on this calculation, the loss in the second quarter is estimated to be between 6.64 to 8.64 billion yuan.
Vanke stated that the main reasons for the losses are related to the significant decrease in settlement scale and gross profit margin of real estate development projects, as well as the impairment provision for certain projects.
Since late May, Vanke’s stock price has been continuously declining. On May 24, the closing price was 8.99 yuan per share. As of the closing on July 10, it has dropped to only 6.65 yuan per share, a decrease of over 30% during this period.
In the face of negative factors, Vanke’s management plans to increase holdings. Vanke disclosed on the 9th that 1,862 core management personnel plan to invest 200 million yuan to increase their holdings of the company’s A-shares, marking the first time Vanke’s management has increased their holdings since 2022.
Vanke is one of China’s largest real estate developers. The state-owned enterprise Shenzhen Metro is currently an important shareholder of Vanke, which has state-owned background. Even amid the continued downturn in China’s real estate industry, Vanke has not been spared.
On March 11th of this year, international rating agency Moody’s downgraded Vanke’s corporate rating to junk, warning of possible further downgrades. Moody’s revoked Vanke’s Baa3 issuer rating, giving it a Ba1 corporate rating. All of Vanke’s ratings have been placed on a downgrade watchlist. Baa3 is the lowest investment grade rating, while Ba1 and below are non-investment grade, commonly known as junk status.