Country Garden's May sales drop 28% with no revival in sight
[BEIJING] Country Garden Holdings' sales slide intensified in May, with the developer faring worse than the broader China housing sector.
The Foshan-based company, once China's largest property firm, reported monthly sales that dropped 28 per cent from a year earlier to about 3.1 billion yuan (S$555.03 million), Bloomberg calculations based on filings from Friday show. The decline was from an already low base, and was much steeper than the 8.6 per cent drop in new home sales posted by the country's top 100 developers.
Falling consumer prices in China are eroding corporate profits and employee income, leading to suppressed demand for home purchases, just as the effects of a stimulus blitz last September start to wear off. Buyers remain concerned about developers' ability to finish projects on time, leading new-home sales to drop since March after a brief period of stabilising.
Country Garden has been counting on a turnaround in sales as the 33–year-old developer continues lengthy restructuring talks more than a year after defaulting on its debt. Yet its efforts to win backing for a US$14.1 billion offshore restructuring are running into resistance after a key group of banks said failure to accept some of their demands would be a 'deal breaker,' according to a court hearing last month.
The builder needs support from three-quarters of debt holders in two individual groups – bank lenders and bondholders. It has said that it has backing from holders of 70 per cent of bonds, but even if it gets more from that class, it still needs bank creditors to get on board to pass the plan through a 'scheme of arrangement' procedure. It has been given a few months' reprieve from its liquidation petition hearing, with the next one set for Aug 11.
The builder said it has seen stabilisation signs in a number of cities, according to a statement citing a May management meeting. But analysts remain concerned.
Country Garden's contracted sales could face 'a protracted contraction on waning buyer sentiment in China's low-tier cities,' Bloomberg Intelligence analysts Kristy Hung and Monica Si wrote in a May report. BLOOMBERG
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