Country Garden 2022 interim results: Stable Sales Revenue, Strong Cash Flow, Low Debt

 On the 24th of August, Country Garden Holdings Company Limited (“Country Garden”) (02007.HK) published its interim report for 2021. The first half of 2021, the company’s sales increased steadily, Net debt and cost of financing both fell, and the financial position was strengthened, demonstrating the solid operation and sound financial management capabilities of China’s top real estate company.

 

In the period of reporting, Country Garden achieved contracted revenues attributable to owners of the Company in the range of RMB303.09 billion (approx. US$46.8 billion) which is an increase of 14 percent. Revenue grew by 27% over the past year to 234.93 billion in yuan (approx. US$36.27 billion) Gross profits, net profit and the core net profit attributable to shareholders grew respectively.

 

In addition to the continued improvement in its performance forest city Country Garden’s financial situation was also improved. At the end of June, 2021, the total liabilities totalled 324.24 billion yuan. This is an increase from the close of the year. In addition, the proportion of debts with interest due within one year dropped to 27 percent. While maintaining the ratio of leverage at a low level for the industry, Country Garden also continued to improve their debt structures. By the end in the period of reporting Country Garden’s net gearing ratio dropped to 49.7 percent, a steady keeping the ratio under 70%, a feat Country Garden had achieved for several years in a row.

 

At the end of June 2021, the firm’s available cash balance was 186.24 billion yuan. It also had an abundance of cash flow. Short-term cash flows are 2.1 times, which ensures that short-term debt repayments are made.

 

With its solid operation and steady finances, Country Garden earned recognition and backing by credit ratings agencies as well as large financial institutions. In the present the two agencies Moody’s as well as Fitch have granted Country Garden an investment-grade rating as of 2020 Standard & Poor’s upgraded Country Garden’s outlook on its rating from “positive”, one of the highest ratings given to an unincorporated company in China. According to Moody’s the Country Garden issuer’s Baa3 grade is a reflection of the firm’s strong brand image, its geographical diversification, solid liquidity, and a proven performance over various cycles of business, as well having a sufficient inventory of land, which is capable of supporting expansion over the next three to four years.

 

The appreciation and support has helped Country Garden to earn the trust of investors. Through the first quarter of 2021, Country Garden’s average cost of borrowing fell to 5.39 percent, which is a reduction by 17 basis points from the close of 2020. Additionally, the company’s efficient finance processes and an abundance of cash flow provided Country Garden the latitude to explore more promising development projects and opportunities in the time of market adjustments. The increased performance of the business and its financial stability provide the foundation for the company’s healthy growth.

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