Vanke Reports Annual Loss of $6.8 Billion Amidst Ongoing Financial Crisis
Vanke, a leading Chinese property firm, reported a $6.8 billion annual loss primarily due to falling sales and profit margins. This marks its first annual loss since 1991, with a 26% drop in revenue. The company faces intense liquidity pressures and management changes, amidst a broader crisis impacting the Chinese real estate sector.
On Monday, Vanke, a major Chinese property developer, announced an annual loss of 49.5 billion yuan ($6.8 billion), attributed to declining sales and decreasing profit margins, despite government efforts to rejuvenate the housing market. The firm characterized 2024 as an “exceptionally challenging year,” expressing regret over the impact of significantly reduced sales and liquidity pressures on its operations.
Vanke, which is partially owned by the Shenzhen government, was the fourth-largest real estate company in China by sales last year, as reported by CRIC. In its filing to the Hong Kong stock exchange, Vanke acknowledged that it struggled to depart from its high-debt, high-turnover model promptly, resulting in issues related to aggressive investments and excessive expansion.
This annual loss marks Vanke’s first since its listing in 1991, surpassing its earlier projection of $6.2 billion. The company experienced a 26% year-on-year decline in revenue, totaling $47.3 million. Contributing factors to these losses included a dramatic reduction in settlement volume and a diminishing gross profit margin in their development business.
Recent personnel changes at Vanke include the resignation of Chief Operating Officer and Executive Vice President Liu Xiao, who will pivot to focus on the firm’s strategic investment business. Additionally, CEO Zhu Jiusheng resigned due to health reasons, amidst speculation of his detention by authorities, as reported by the Economic Reporter.
Despite newly announced support measures from Beijing, aimed at revitalizing the property sector such as lowering deed taxes, Vanke reported net losses of $4.35 billion in the last quarter of the previous year. The firm anticipates facing concentrated public debt repayments this year, intensifying liquidity challenges. It is reported that Chinese authorities are exploring ways to assist Vanke in addressing a funding shortfall of $6.8 billion this year.
Vanke is not alone in facing financial troubles; other developers such as Kaisa and Country Garden are also dealing with substantial losses and debt crises. Kaisa reported a 48.4% increase in annual losses to $4.03 billion, while Country Garden announced a loss of $4.5 billion with total debts reaching $34.9 billion at year-end.
In summary, Vanke’s substantial annual loss highlights the significant challenges facing the Chinese real estate sector, fueled by declining sales and expansive debt. The management shakeup and ongoing liquidity pressures reflect the broader crisis within the housing market, prompting government intervention. Vanke’s situation, alongside other troubled developers, underscores the urgent need for effective solutions to stabilize the industry and restore investor confidence.
Original Source: homenewshere.com
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