China Evergrande, the country’s biggest home builder, said it is transforming itself into a diversified conglomerate as the central government clamps down on the heavily indebted real estate industry.
“We are not the Evergrande we used to be. The new Evergrande is no longer just a property company, but a conglomerate hosting diversified businesses and technologies,” said company chairman Hui Ka-yan, the 14th-richest person in China.
Hui’s remarks came during an annual results briefing on Wednesday after Evergrande reported it carried debts of 670 billion yuan (US$102 billion) at the end of last year, down 200 billion yuan from a year earlier.
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The dramatic reduction of debt still leaves Evergrande very much the wrong side of all three “red lines” laid out by Beijing last summer.
The three red lines, outlined last August during a financial symposium, represent different limits on borrowing: liability-to-asset ratio excluding advanced receipts at 70 per cent, net debt-to-equity ratio at 100 per cent, and cash to short-term debt ratio at one time.
The company’s boss pledged to deleverage further.
“We will further halve our debts over the next two years and hit 350 billion yuan or less by June 2023,” said Xia Haijun, chief executive officer. “And we aim to meet two of the metrics by the end of this year and achieve all three by 2022.”
Evergrande’s net gearing ratio, a measure of equity to debt, hit 152.9 per cent at the end of 2020, slightly down from 159.3 per cent a year ago, according to a company filing on Wednesday to the Hong Kong stock exchange.
The company saw core profit plunge 26.2 per cent to 30.13 billion yuan for the year, while revenue came in at 507.25 billion yuan, a rise of 6.2 per cent.
Contracted sales amounted to 723.25 billion yuan, up 20.3 per cent on the year, boosted by several rounds of nationwide discounts last year. Evergrande slashed prices across 800 property projects by up to 30 per cent.
The company expects to sell 750 billion yuan worth of homes this year.
Hui has been trying to extend his empire beyond building homes, and becoming a serious player in the world’s largest electric car market is top of the company’s to-do list.
“We will start trial production in the fourth quarter of this year and will see mass production of our electric vehicles next year. We are moving forward step by step,” said Hui.
Last week Evergrande New Energy Vehicle Group, the carmaking arm of China Evergrande Group, reported a net loss for 2020 that had widened to 7.7 billion yuan from 4.9 billion yuan a year, amid heavy investment in the development of new car models.
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