Evergrande Posts Losses of $81 Billion Over Two Years as it Reports Long-Delayed Results
Evergrande Group, the heavily indebted Chinese property developer, has finally released its long-delayed financial results, marking a crucial step in its debt restructuring, which is poised to become one of the largest in Chinese corporate history.
According to a filing on Monday with the stock exchange, the company reported losses amounting to 476 billion yuan ($66 billion) for 2021 and 106 billion yuan ($15 billion) for 2022, resulting in a combined net loss of 582 billion yuan ($81 billion) for the two years.
This marks the first time Evergrande has disclosed its financial results since 2021 when its financial turmoil sparked China’s worst-ever property crisis, continuing to weigh on the nation’s economy.
Trading of Evergrande shares has been suspended since March 2022 due to the delay in releasing the 2021 results. To avoid being delisted, the company had to report the results no later than September 20, along with other requirements specified by the stock exchange.
The filing also revealed that Evergrande’s total debts reached 2.437 trillion yuan ($340 billion) by the end of 2021, approximately 2% of China’s gross domestic product. Meanwhile, the company’s total assets were valued at only 1.838 trillion yuan ($256 billion), raising concerns of possible insolvency.
The filing indicated “the existence of material uncertainties” that may cast significant doubt about Evergrande’s ability to continue as a going concern.
Since late 2021, Evergrande has been undergoing a major debt restructuring mandated by the Chinese government. In March, the company unveiled a multi-billion dollar restructuring plan aimed at settling its international creditors, but it needed additional financing of $36 billion to $44 billion to resume work and complete property projects.
Founded in 1996 by Xu Jiayin, Evergrande was the second-largest property developer in China by sales in 2020. Before the crisis, it boasted over 200,000 employees, generating annual revenues exceeding $110 billion, and owned more than 1,300 developments in numerous cities.
However, a government crackdown on excessive borrowing in the real estate industry in 2021 exacerbated Evergrande’s cash crunch. The company’s financial troubles led to credit downgrades and debt defaults, sending shockwaves through China’s economy and global markets.
In response, the Chinese government intervened and initiated a debt restructuring to prevent a disorderly collapse that could wreak havoc on the economy and cause social unrest.
Evergrande’s financial instability has been a concern for global investors, given its substantial dollar-denominated debt. The company’s debt restructuring process could set a significant precedent for handling similar cases involving Chinese developers. The real estate sector, along with related industries, has historically been a key driver of China’s economic growth, contributing up to 30% of the country’s GDP and employing millions of workers.
