Developers Country Garden, Sunac China warn construction, sales may be disrupted as Covid-19 subdues business activity

By sandy.li@scmp.com sandy.li@scmp.com

/ https://www.scmp.com/business/article/3077266/developers-country-garden-sunac-china-warn-construction-sales-may-be?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3077266 |

April 6, 2020 10:21 AM SGT

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Two of China's biggest property developers have warned that their sales and construction schedules are likely to be disrupted by a downturn in demand caused by the Covid-19 outbreak.

Country Garden Holdings, the largest seller of homes in China, said its building and sales progress may be exposed to short-term volatility as business activities remain subdued by efforts to contain the epidemic.

The warning came as the Guangdong-based builder reported a 17.6 per cent increase in core profit " which excludes valuation gains and foreign-exchange losses " to 40.12 billion yuan in 2019.

The rise was well below the 38.2 per cent increase the company reported in 2018.

Mainland developers accelerate sales to shore up cash amid Covid-19 pandemic

On Friday, it announced a final dividend of 34.25 fen, up 13 per cent from a year ago.

Delivery of 5,000 homes to buyers might be deferred for about two months but the firm would try its best to speed up construction work, Country Garden president and executive director Mo Bin said.

"Sales in March have rebounded to the normal level, with about 600 million yuan per day," he said, adding that the firm had spent 1.5 million yuan (HK$1.64 million) on four facial mask production lines. "The masks will be for the use of our staff, and we will also donate to Wuhan, the government and overseas."

In a conference call later in the day, he said nearly all the company's sales centres and construction sites had reopened for business, except those in Hubei, the epicentre of the coronavirus. The developer has acquired four production lines that are churning out 300,000 protective masks a day, he added.

Country Garden, chaired by Yeung Kwok Keung, one of China's wealthiest men, said contracted sales plunged by half to 20.9 billion yuan in February when the nation was in the grip of the coronavirus. Covid-19, the illness caused by the virus, has claimed more than 3,200 lives and infected at least 81,000 people in mainland China.

The epidemic has dragged down the country's economic growth, and threatens to trigger an unprecedented global economic crisis.

Chris Yip, senior director at S&P Global Ratings, said there has been an average drop of about 20 per cent in contracted sales among its rated developers that have released February figures.

"While the impact seen thus far should be recoverable, it still needs actual sales to pick up even as sales centres have largely reopened in recent weeks across most regions," he said. "We do believe that there could be some delays in delivery that could impact some of their revenue for 2020."

China Vanke says coronavirus is making survival difficult for the sector

Meanwhile, Sunac China Holdings, the country's fourth largest builder by sales, saw profit growth of 57.1 per cent to 26.03 billion yuan last year, driven by higher property sales, according to a filing to the Hong Kong stock exchange on Friday.

"In 2020, the nationwide suspension of work and production due to the Covid-19 epidemic has inevitably caused delays to some extent in the group's launch of new properties and its commencement and completion plans," said chairman Sun Hongbin in the company statement.

But he expects the group to have properties worth 820 billion yuan available for sale this year if the impact of the epidemic can be gradually eliminated "according to the current good trend."

Logan Property Holdings said its core profit rose 42.7 per cent to 10.02 billion yuan last year on revenue of 57.48 billion yuan.

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This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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