China Evergrande warns of default risks, H1 profit more than doubles (updated)

Shenzhen Investment

31/08/2021 11:14

(Adds details, background)
    By Clare Jim
    HONG KONG, Aug 31 (Reuters) - Debt-laden property developer
China Evergrande Group  3333.HK  warned on Tuesday of liquidity
and default risks if it fails to resume construction, dispose of
more assets and renew loans, as it reported a doubling in
first-half net profit.
    The country's No.2 property developer by sales said in a
filing it would adjust project development timetables,
"vigorously" promote sales, renew or extend borrowings, dispose
of equity interests and assets as well as introduce new
investors to the group and its units.
    The measures were aimed at improving cashflow and reducing
debt, it said.
    "In the event that the Group fails to implement the above
measures...its liquidity issues may deteriorate, which may
result in defaults on borrowings and litigations," it said in a
filing to the stock exchange.
    But it added the company will have sufficient working
capital to meet the financial obligations due in the next 12
months, if the measures are implemented effectively.
    Evergrande has been scrambling to raise funds it needs to
pay its many lenders and suppliers, with regulators and
financial markets worried that any crisis could ripple through
China's banking system.
    Industry watchers said clear signs are now emerging that
authorities at various levels are stepping in to avoid a hard
landing for Evergrande, amid worries about the "social impact"
of a possible collapse.  urn:newsml:reuters.com:*:nL4N2PU2HD
    Evergrande said earlier this month that it is in talks to
sell certain assets, including stakes in Hong Kong-listed units
Evergrande New Energy Vehicle  0708.HK  and Evergrande Property
Services  6666.HK .
    Reuters also reported the company was seeking buyers for a
bulk of its urban renewal projects in the southern high-tech
city Shenzhen.  urn:newsml:reuters.com:*:nL1N2PG0KQ
    China Vanke  2202.HK   000002.SZ , the country's No.3
player, and Shenzhen Investment  0604.HK , backed by the
Shenzhen city government, told reporters at their earnings
conferences on Monday they have been in talks with Evergrande on
cooperation but no decision has been made. 
    In Tuesday's filing, Evergrande disclosed for the first time
it has sold property units to suppliers and contractors to
offset some payments, amounting to 25.2 billion yuan ($3.90
billion), and offloaded a 49% stake in bottled water unit,
Evergrande Spring Group, for 2 billion yuan. 
    It has also disposed interests in five property projects and
other non-core assets for a total of 9.27 billion yuan, it
added.
    The developer reported a 120% rise in net profit in the
first six months to 14.4 billion yuan.
    Including non-controlling interests, however, profit was
10.5 billion yuan, 29% lower than a year earlier, dampened by
losses in property and NEV businesses. The company issued a
profit warning last week.
    Its total borrowings stood at 571.8 billion yuan, compared
with 716.5 billion at the end of 2020, while total liabilities
rose slightly to 1.97 trillion yuan, compared with 1.95 trillion
yuan.
    Shares of Evergrande eased 0.7% ahead of the results, versus
a 1.3% rise in the boarder market  .HSI . 
($1 = 6.4616 Chinese yuan)

 (Reporting by Clare Jim; Editing by Louise Heavens and
Jacqueline Wong)
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters
Messaging: clare.jim.thomsonreuters.com@reuters.net))