China Communications Real estate external guarantee total amount is too high, debt pressure, 100 billion target is difficult to achieve

2022-04-29 0 By

Guide language: 100 billion target has not yet been successful, in the real estate internal personnel has been a major reshuffle, put forward the goal of Li Yongqian also resigned from the company’s president.What’s more, just two years after the plan was advanced, the real estate industry encountered a cold winter, with debt and capital flow trapped. The target of CCCC real estate was afraid to be suspended. Now enterprises have chosen self-protection first, and CCCC real estate is probably no exception.China Communications Real Estate Released the announcement that the total amount of external guarantee of the company and its holding subsidiaries has exceeded 100% of the net assets returned to the parent, and also issued the announcement of providing guarantee to its subsidiaries on the same day.Before this, in addition to frequent and intensive for the subsidiary to provide guarantees, but also repeatedly to the parent company borrowing.One of the reasons for the lack of cash is the 100 billion yuan target that CCCC announced earlier. Although it did achieve that target recently, its profits actually fell.In addition, aggressive expansion led to rising debt, capital flow tension, once stepped on two of the “three red lines.”In the real estate industry have only to protect themselves under the environment, in the real estate 100 billion target is afraid it has been difficult to achieve.On February 7, China Communications Real Estate (000736.SZ) announced that the total amount of external guarantees of the company and its holding subsidiaries exceeded 100% of the audited net assets of the latest period, and the amount of guarantees for units with asset-liability ratio of more than 70% exceeded 50% of the audited net assets of the latest period.The guarantee amount of non-consolidated statements has exceeded 30% of the audited net assets of the latest period. Investors are requested to pay full attention to the guarantee risk.By December 31, 2021, the balance of guarantee provided by CCCC for its holding subsidiaries and between holding subsidiaries was 13.737 billion yuan, accounting for 448.73% of the net assets returned to parent at the end of 2020.The guarantee balance for the participating companies not included in the consolidated statements was 2.992 billion yuan, accounting for 97.72% of the net assets returned to parent at the end of 2020.Although there is no overdue guarantee at present, the total proportion of guarantee exceeds 100% of the net assets returned to the parent, so it can be said that the risk is very large, but even so, China Communications Real Estate is still frequent external guarantee recently.On the same day of the announcement, CCCC Real Estate Co., Ltd. disclosed that its wholly-owned subsidiary shenzhen CCCC Real Estate Co., Ltd. held 99.95% of the shares of Huizhou CCCC Yashong Real Estate Co., LTD., which applied for a loan of 600 million yuan from The Huizhou Branch of China Construction Bank Co., Ltd. due to business needs.China Communications Real Estate will provide joint and several liability guarantee for the loan of no more than RMB 599.7 million yuan, and China Communications Yashong will provide counterguarantee to China Communications Real Estate for the part of guarantee provided by China Communications Real Estate.According to the announcement, in 2022, China Communications Real Estate will add a total of 14.759 billion yuan of guarantee to its holding subsidiaries, including 14.089 billion yuan to the holding subsidiaries with an asset-liability ratio of more than 70% and 670 million yuan to the holding subsidiaries with an asset-liability ratio of less than 70%.As the announcement shows, this isn’t the first time in recent times that CCCC has offered guarantees for subsidiaries.Not long ago, on January 26, CCCC provided a joint and several liability guarantee of no more than 999.6 million yuan for Huizhou CCCC Real Estate.On December 15, CCCC Provided guarantee progress for the project company Zhengzhou Binyue Real Estate Development Co., LTD., involving an amount of 32 million yuan.On October 26, CCCC Real Estate guaranteed no more than 665,994,700 yuan for its wholly-owned subsidiary CCCC Shimao, and CCCC Shimao provided corresponding counter-guarantee to CCCC Real Estate.On October 20, CCCC Real Estate applied for a fixed asset loan of no more than 1.5 billion yuan for kunming CCCC Xisheng, a subsidiary holding 62% of the equity. CCCC Real Estate provided full joint and several liability guarantee for the above financing matters.In addition, earlier, China Communications Real Estate also provided guarantees for eight subsidiaries with a debt to asset ratio of more than 70%. As can be seen from these intensive guarantee announcements, China Communications Real Estate seems to be a little short of money.In addition to guaranteeing its subsidiaries frequently, In 2021, CCCC Real Estate borrowed from the controlling shareholder CCCC Real Estate Group twice, with the amount of both loans not exceeding 10 billion yuan and the annual interest rate not exceeding 10%.This is not the first time that CCCC has borrowed money from CCCC Real Estate group. As early as 2017, CCCC has already borrowed billions of dollars.Later, Li Yongqian, the former president of China Communications Real Estate, set a performance target of “35 billion yuan in 2019, 50 billion yuan in 2020, and over 100 billion yuan in 2023”. In order to expand the scale and complete the set target of 100 billion yuan, the help of capital is indispensable, and it starts from the target set.The amount of borrowing from CCCC after 2019 is also growing.From 2020, China Communications Real Estate Group and China Communications Real Estate Group began to sign the annual loan framework contract.Among them, the amount of borrowing in 2020 will not exceed 8 billion yuan, and the amount of borrowing in 2021 will not exceed 10 billion yuan.With the capital of the parent company as a backstop, CCCC property began its first step of expansion.In 2020, CCCC added 30 new plots of land, an increase of 100% compared with the 15 plots in 2019. The gross floor area increased by 176.90% to 6.3559 million square meters, and the total purchase price of land was 53.58 billion yuan.In 2021, China Real Estate still maintain greater strength.According to Kreis data, in the whole year of 2021, the newly added land value is 41.15 billion yuan, the newly added land construction area is 54.15 million square meters, and the newly added goods value is 85.28 billion yuan.Thanks to its rich land bank, CCCC’s sales reached 53.3 billion yuan in 2020, up 81.37 percent year on year, exceeding its target, but total revenue and profit fell 12.54 percent and 18.26 percent year on year, respectively.On its way to $100 billion, profits fell slightly, although sales rose significantly.According to the report of the third quarter of 2021, from July to September of 2021, the company’s operating revenue was about 1.037 billion yuan, a year-on-year decrease of 48.80%;The net profit of the mother was about -160 million yuan, a year-on-year decrease of 199.04%.From January to September of 2021, the company’s operating revenue was about 5.986 billion yuan, down 25.43% year on year.The net profit of the mother was about 1,806,900 yuan, down 99.37% year-on-year.For the sudden drop in net profit, China Communications Real Estate explained that the housing delivered area in this period decreased compared with the same period last year, resulting in lower gross profit;During the period, the number of newly acquired projects and land reserve area are significantly more than before. Most of the projects are still in the early development stage, and the increase of personnel required for new projects leads to the increase of management costs.The Company expects to see an increase in the number of projects reaching pre-sale nodes during the reporting period compared to the same period last year, and thus sales expenses increased accordingly.Under the radical expansion, the cash flow of real estate tightening, debt pressure.By the end of the third quarter of 2021, the net cash flow generated by the company’s operating activities was about -13.4 billion yuan, a decrease of 5.65% compared with the end of the previous year.During the period, the company’s non-current liabilities due within one year were about 14.899 billion yuan, an increase of 156.07% compared with the end of the previous year;Short-term borrowings were about $1.928 billion, down about 13.9% from the end of last year, totalling $16.827 billion, while the monetary funds of CCCC Real Estate were about $16.831 billion, barely covering the total.In addition, as the current sales expenses increased by 45.75% compared to the previous period to reach 411 million yuan, the rapidly rising sales expenses squeezed the profit margin.Meanwhile, China Communications Real Estate had a debt-to-asset ratio of 88.46% and a net debt-to-asset ratio of 265.08%, two of the three red lines set by the central bank and the Ministry of Housing and Urban-Rural Development.It is worth mentioning that before the Spring Festival this year, due to poor sales performance and financial constraints, China Communications Real Estate Announced that it would deduct the annual bonus of the company’s management and all employees in the headquarters in 2021.100 billion target has not been successful, in the real estate has been a major personnel reshuffle, put forward the goal of Li Yongqian also resigned from the company’s president.What’s more, just two years after the plan was advanced, the real estate industry encountered a cold winter, with debt and capital flow trapped. The target of CCCC real estate was afraid to be suspended. Now enterprises have chosen self-protection first, and CCCC real estate is probably no exception.Source: Hydrogen Finance