By YANG Bingke
After 525 days of suspension, troubled Chinese real-estate developer Evergrande Group resumed trading on the Hong Kong Stock Exchange on Monday, with shares nosediving 86.7 percent to HK$0.22 (2.8 US cents, 0.2 yuan). Before the suspension on March 21, 2022, Evergrande Group stood at HK$1.65, with a market valuation of HK$21.8 billion, now there is only HK$2.9 billion left.
Prior to the resumption, Evergrande Group released its half-year results for 2023. Revenue for the first half of 2023 was 128 billion yuan, with a gross profit of about 9.8 billion yuan, resulting in a gross profit margin of 7.6 percent. The operating loss for the period was 17.4 billion yuan, and the non-operating loss (including losses from litigation, land repossession, equity disposal, and impairment of assets) amounted to 15 billion yuan. Income tax expenses were 6.8 billion yuan, resulting in a total net loss of 39.2 billion yuan.
In terms of liabilities, Evergrande's total liabilities amounted to 2.4 trillion yuan, while its total assets were only 1.7 trillion yuan. After excluding contract liabilities of 604 billion yuan, the amount was 1.8 trillion yuan. This represents an increase of 67.8 billion yuan compared to the end of 2022.
Among the primary liabilities, borrowings were 625 billion yuan, trade payables and other payables were 1.1 trillion yuan (including payables for engineering materials of 596 billion yuan), and other liabilities were 103 billion yuan. The average annual interest rate on borrowings was 8 percent.
Compared to the end of 2022, there has been a slight increase in the number of employees, 109,000, up from 193,000
Evergrande Group said it is negotiating loan extensions with domestic lenders. Due to the dispersed nature of lenders and the continuously changing market environment, more time is needed to determine each extension arrangement.
Sales receipts are currently insufficient compared to liabilities. In the first half of 2023, the group achieved contracted sales of 33.41 billion yuan, with a contracted sales area of 5.1 million square meters. Cumulative sales receipts for the first half of the year amounted to 27.1 billion yuan.
The company said that with the help of local governments and suppliers, all 732 construction projects had resumed work. It delivered 301,000 homes last year. As of June 30, Evergrande possesses a land reserve of 190 million square meters. The company is also involved in 78 urban renewal projects, with 55 in the Greater Bay Area, and 34 in Shenzhen.
Subsidiaries Evergrande Auto and Evergrande Property Services have both resumed trading. The next task is to advance the restructuring of external debt. In March, Evergrande put forward a plan for overseas debt, which received approval from a Hong Kong court in July. Creditors will vote on the plan by the end of August.
Last week, China Evergrande sought bankruptcy protection in the US bankruptcy court, aiming to create conditions for debt restructuring. The future of Evergrande depends on offshore creditors agreeing to the restructuring plan and how the implementation unfolds.
The company's ongoing operational capability remains contingent on the completion of the overseas debt restructuring and extensions or deferrals with the remaining lenders.
