Evergrande unveils plans to halve debt after profit falls

[BEIJING] China Evergrande Group unveiled plans to roughly halve its debt over the next two years after reporting its second consecutive drop in annual profit.

In a year when billionaire Hui Ka Yan's conglomerate narrowly navigated a liquidity scare, revenue missed analysts' estimates while adjusted core profit slid 26 per cent to 30.1 billion yuan (S$6.17 billion), the Shenzhen-based company said Wednesday.

Since Evergrande's cash crunch in September spooked investors and China's top financial officials, the group has embarked on extensive sales promotions for its property projects and spearheaded multiple equity fundraisings. Mr Hui's empire, which ranges from the nation's biggest developer by revenue to an electric-vehicle startup, has seen its combined market size more than double to about US$131 billion.

Evergrande's total debt shrank 14 per cent from the end of June to 717 billion yuan in December, and to 674 billion yuan in March, the lowest in two years, according to Bloomberg calculations based on the results. It plans to reduce the borrowings further to 350 billion yuan or less by June 2023, it said.

The drop in debt came after a swiftly changing policy environment in China coincided with Evergrande's saga. In the third quarter, officials drafted what state-run media have called "three red lines" - financial metrics that developers will have to meet if they want to borrow more.

The firm continued to miss the three requirements at the end of last year, according to Bloomberg calculations based on the annual results, lagging behind several rivals that have shown improvement. Six out of 12 developers covered by Bloomberg Intelligence showed greater compliance with the rules in their 2020 results, BI analyst Kristy Hung wrote in a note on Tuesday.

Evergrande plans to meet two of the metrics by the end of this year and achieve all three by the end of 2022, President Xia Haijun said Wednesday.

BLOOMBERG