China Evergrande first major mainland developer to report profit decline as cooling measures hit sales

By Pearl Liu peral.liu@scmp.com / https://www.scmp.com/business/article/3024749/china-evergrande-first-major-mainland-developer-report-profit-decline?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | September 11, 2019 11:57 AM SGT
China Evergrande, the country's third largest property developer by sales, posted a 45 per cent plunge in first-half core profit on Wednesday, becoming the first among the mainland's top 10 developers to report a decline in earnings.
The sharp fall in core earnings " its first drop since the first half of 2016 " came after the central government rolled out a slew of cooling measures to curb property price growth earlier this year.
Interim core profit came in at 30.35 billion yuan (US$4.2 billion), while revenue dropped 24.4 per cent to 226.98 billion yuan in the comparable period.
Xia Haijun, vice-chairman and president of Evergrande, said that the cooling measures initiated by the central government was not aimed at bringing about a large scale decline in home prices or shrinking the housing market.
Xia Haijun, vice-chairman and president of China Evergrande. Photo: Nora Tam alt=Xia Haijun, vice-chairman and president of China Evergrande. Photo: Nora Tam
"At such a critical moment in the trade war, a stable housing market is very important to China's economy," said Xia.
The property sector " a key pillar of China's extraordinary growth over the past four decades " contributes 25 per cent of China's domestic economic output, including all the sectors along its supply chain, such as cement and steel, according to Moody's Investors Service.
"The government's message to the developers is that they should give up their illusions of a runaway increase in home price and raking billions of dollars," Xia said.
He said that Evergrande will be a "model student" and closely follow the government's message on housing.
On August 20, Evergrande became the first builder to launch a nationwide campaign to cut prices, offering discounts of up to 22 per cent at its 532 projects.
Even before the impact of the discounts are likely to be...