The day before yesterday (March 30th, 2023), Country Garden Group publicly released its annual financial report for 2022. Unsurprisingly, in the state that the domestic real estate market continues to slump, Country Garden, as the "first real estate developer in the universe", experienced a sharp drop in sales, a drop in gross profit margin and a net profit of negative 2.962 billion yuan. The net profit attributable to the parent company is as high as 6.052 billion yuan!
According to the financial report released by Country Garden, in 2022, the company’s operating income was 430.371 billion yuan, a decrease of 92.693 billion yuan or 17.72% compared with 523.064 billion yuan in 2021. The gross profit in that year was 32.883 billion yuan, a decrease of 59.899 billion yuan compared with 92.782 billion yuan in 2021, with a drop rate of 64.56%! In 2022, the gross profit margin of Country Garden Group was only 7.64%, which was 10.1% lower than that of 17.74% in 2021. The decline is also as high as 56.93%!
In this regard, it is still in the case of layoffs of more than 30,000 people (which has saved billions of employees’ salaries). Otherwise, Country Garden’s net profit attributable to the parent company will easily exceed 10 billion yuan. According to Country Garden’s annual financial report for 2022, as of December 31, 2022, the number of employees in the company was 69,932. On December 31, 2021, the number was 100,705. In other words, in 2022, Country Garden Group laid off 30,773 people. The layoff rate is 30.56%. It is equivalent to 10 people laying off more than 3 people.
A few years ago, Country Garden Group, relying on high leverage, rose suddenly in the domestic real estate industry. While desperately taking land, its liabilities also increased sharply. In 2018, Country Garden became the leader of domestic real estate developers, but their asset-liability ratio also soared to 89.36%. In 2021, Country Garden Group’s debt reached 1.73 trillion yuan, second only to Guangzhou Evergrande Group’s 1.97 trillion yuan. Even now, the total liabilities of Country Garden Group are as high as 1.6 trillion yuan.
Country Garden Group is heavily in debt, which has made many people inside and outside the real estate industry look down on Country Garden Group. After the lightning storm of Guangzhou Evergrande Group, there has been a rumor that Country Garden will become the second Evergrande. However, Sunac Group later became the second place of Evergrande. Although Country Garden could not become the second place of Evergrande, the argument that Country Garden Group became the first place of Evergrande never disappeared.
In 2022, the national high-level officials once again publicly announced that the real estate industry should be regarded as the pillar industry of the national economy. The state not only spared no effort to introduce the policy of changing samples and renovating, but also spared no effort to save real estate developers, and also took out 5000 billion yuan of real money to give blood transfusion to real estate developers. Country Garden Group has obtained bank credit lines of more than 300 billion yuan from several banks, including six state-owned banks.
If there is no bank credit line of more than 300 billion yuan, maybe Country Garden Group has already thundered. What will Country Garden take to pay back the debt of nearly 1.7 trillion yuan? It’s scary to think about it. That is, part of it is the purchase price, but don’t you need a lot of money to build a house? There are so many construction sites in Country Garden that there is no money.
According to Country Garden Group’s 2022 annual financial report, Country Garden Group’s debt is close to more than 1.7 trillion yuan, but its cash and cash equivalents on the books are only 128.3 billion yuan. The book capital is less than 8% of the total debt. Obviously, Country Garden Group’s use of this money to repay huge debts can only be a drop in the bucket. According to relevant media reports, Country Garden Group, in order to obtain more liquidity, has been doing everything possible to make money.
In 2022, Country Garden Group completed two rights issue financing, raising more than 8.6 billion Hong Kong dollars (about 7.5 billion yuan converted into RMB). In 2023, Country Garden Group signed a financing agreement with Minsheng Bank Hong Kong Branch, and obtained a term loan financing of up to 50 million US dollars (converted into RMB about 340 million). Of course, compared with the credit line of domestic banks of more than 300 billion yuan, it is really insignificant.
The author thinks that in 2023, the sales of Country Garden Group may continue to decline, the gross profit will also decrease, and the loss may continue to increase. But none of this matters. The important thing is that they have to find ways to keep making money. Otherwise, it is highly possible to become the number one of Evergrande.
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