Original link: https://www.latepost.com/news/dj_detail?id=1802
Country Garden, facing the risk of breach of contract, publicly rescues itself
Country Garden, once the largest private real estate company in China by sales, is in danger of defaulting due to industry-wide liquidity shortages.
On August 9, Country Garden admitted through the media that it failed to repay two US dollar bond coupons totaling US$22.5 million as scheduled. On August 10, Country Garden announced that due to the unfavorable sales and refinancing environment, it expected a loss of 45 billion to 55 billion yuan in the first half of the year, and admitted that it faced periodic liquidity pressure.
The announcement also mentioned that the management underestimated the depth, intensity, and duration of the market downturn, and failed to see major changes in the supply and demand relationship in the real estate market. Not slow enough and so on.
Today, Country Garden is openly saving itself. According to its latest announcement, related work will be carried out around the following four aspects:
- Go all out to ensure delivery: including the implementation of the main responsibility, special funds for special use, strict management of pre-sale monitoring funds, etc.;
- Actively resolve phased liquidity pressure: We will communicate with various stakeholders and consider adopting various debt management measures;
- Guarantee the orderly development of operations: try our best to do a good job in sales, revitalize the accumulated assets such as hotels and office buildings, strengthen internal management and control, and further streamline the organization, etc.;
- Strengthen organizational leadership in special periods: set up a special working group headed by the chairman of the board of directors (Yang Huiyan) to tide over difficulties.
According to China Business News, an analyst who is familiar with the debt restructuring path of real estate companies pointed out that with the size of Country Garden, it is impossible not to pay more than 100 million coupons. The most likely reason is that the company has other arrangements, such as before debt restructuring. Payment of debt principal and interest will be suspended. An employee also revealed that due to the long-term downturn in the property market, the company’s sales decline, and increased capital consumption, the company’s senior management may have new considerations for debt repayment.
As one of the industry leaders, Country Garden’s debt situation has become bad since mid-2021.
In August 2020, when the three red lines policy was launched, Country Garden “only” touched one red line, which is still “healthy” compared with some of its peers. In the following year, Country Garden’s land acquisition amount decreased by 8% year-on-year, still ranking first in the country. As the overall property market accelerates downward from 2021, Country Garden, which is dominated by third- and fourth-tier cities, is facing a more serious lack of demand.
According to Wind data, Country Garden’s contracted sales area in 2021 fell by 1.4%. Beginning in July of that year, the average sales price also began to decrease, and the rate of decline expanded from 2% in the middle of the year to 10.4% at the end of the year.
This trend intensifies in 2022. Country Garden’s annual sales area fell by 33% year-on-year, sales amount fell by 36%, and gross profit margin dropped by another 10 percentage points year-on-year to 7.7%, partly because of higher land prices. Turned from profit to loss for the whole year, recording a net loss of 6.05 billion yuan.
The company began to reduce expenditure, including reducing land acquisition and reducing the start of work. In 2022, the company’s land payment will be 12.1 billion yuan, a decrease of more than 90% year-on-year, and the project payment will also decrease by 15% to 237.3 billion yuan.
In addition, Country Garden’s cash flow from investment activities last year was 4.41 billion yuan, which was the first time since 2007 to return to positive, which means that more assets were sold than bought. But as of now, Country Garden has not disposed of property assets on a large scale. And peers R&F and Sunac have already begun to sell their projects at a loss.
In December last year, Yang Huiyan, the chairman of Country Garden, sold part of the equity of Country Garden Services at a 10% discount, cashed in HK$5.06 billion, and lent it to Country Garden in an interest-free and unsecured form. However, last month, Yang Huiyan donated 6 billion Hong Kong dollars worth of Country Garden shares to the Guoqiang Charity Foundation (Overseas) founded by her sister, which caused controversy.
Under a series of adjustments, Country Garden’s total liabilities fell from 1.76 trillion yuan at the end of 2020 to 1.43 trillion yuan at the end of last year, a decrease of 323.9 billion yuan. According to Country Garden’s response this week, the company has also achieved “guaranteed delivery of buildings”. It delivered nearly 700,000 houses last year and 278,000 houses in the first half of the year, without overdue delivery.
According to Jiemian News, Li Yujia, chief researcher at the Housing Policy Research Center of the Guangdong Urban Planning Institute, said that Country Garden’s problems are mainly pessimistic expectations, asset liquidity and asset prices, and it has not engaged in irrational diversified operations or capital operations. .
However, in an industry that relies on high leverage and rapid expansion, Country Garden is no exception, and risks are naturally inevitable. Just at the beginning of this year, Country Garden also believed that “debt repayment pressure is not great” and the company’s cash can cover short-term debts. However, in the first seven months of this year, the company’s sales continued to decline by more than 30%, exceeding expectations. In the pro-cyclical real estate industry, once the trend is established, it is extremely difficult to reverse it. (Lin Guangying)
SMIC’s three manufacturing processes are fully loaded against the trend
In the second quarter of this year, SMIC’s sales revenue increased by 6.7% from the previous quarter to US$1.56 billion, exceeding expectations. The company expects that as the inventory of domestic chip design companies continues to decline and the demand for new product stocking increases, the revenue in the second half of the year will also be better than that in the first half.
SMIC CEO Zhao Haijun said in the earnings conference call that overall, the company’s view of the market has not changed much from the first quarter. The demand for electronic products in China and even the world is still lower than expected, especially mobile phones that are in the innovation bottleneck period. The performance is the weakest, the demand does not increase but falls, and the replacement cycle is lengthened. The supply and demand of other sub-sectors such as PC, industry, new energy, and automobiles gradually tend to balance.
In the quarter, SMIC’s capacity utilization rate was 78.3%, an increase of more than 10 percentage points compared to the first quarter. Compared with other major chip foundries, SMIC took the lead in getting out of the trough and rebounding strongly, which surprised the industry and the market. Zhao Haijun explained that the main driving force for the growth came from domestic customers taking the lead in replenishing inventory, and the “refurbished machine” brought Urgent order demand.
At present, 80% of SMIC’s revenue comes from China, and 20% comes from overseas. The time difference between domestic and foreign economic cycles has actually made SMIC’s order demand pick up earlier. Zhao Haijun said that compared with leading suppliers in Europe and the United States, many domestic mobile phone parts manufacturers are second- and third-suppliers. When downstream end customers start to reduce purchases due to insufficient demand, they are often the first to be cut orders, which is why they are more expensive than leading suppliers. Suppliers started clearing inventories two quarters earlier. When European and American suppliers began to reduce their inventory, domestic suppliers completed the steps of clearing inventory, resumed placing orders, and replenished their positions for new products.
Another important source of demand is “refurbished machines.” The global annual shipment of smartphones is about 1.24 billion units, of which about 140 million units are “refurbished machines” after recycling and repairing old mobile phones. Chip International has brought a lot of urgent orders. However, the unit price of chips needed for these old mobile phones is often lower, which also explains to a certain extent why SMIC’s gross profit margin continued to decline by 0.5 percentage points when SMIC’s revenue and capacity utilization rate both recovered sharply in the second quarter.
Other highlights from the same call include:
- Expectations for the overall recovery of the market next year, especially mobile phones and consumer electronics, tend to be conservative;
- The end point of the expansion plan remains unchanged, but the pace of expansion in the middle will follow customers and market adjustments. Part of the reason for the current aggressive investment and expansion is that SMIC needs to spend more than other fabs before buying equipment. approval process, and thus require advance procurement;
- In addition to the previously fully loaded 28nm and 40nm production lines, the 55nm production line also reached full capacity in the second quarter. (Qiu Hao)
Huawei’s semi-annual profit is 30% higher than last year’s full year
On August 11, Huawei announced its results for the first half of 2023. Revenue increased by 3.1% year-on-year to 310.9 billion yuan, and revenue fell by 6% in the same period last year.
Huawei’s reported net profit margins appear “abnormal” compared with previous years. A net profit margin of 15% means that Huawei’s profit in the first half of this year was 46.6 billion yuan, 30% more than the whole of last year.
Huawei did not disclose the source of profits. Part of the profit may come from the sale of Huawei’s Honor mobile phone and x86 server business. Huawei disclosed in its 2021 annual report that the acquirers of these two businesses will pay in installments. This year, Huawei received the first payment, with a net profit margin of 19%.
According to the “industry perspective”, Huawei disclosed the revenue structure in the first half of this year (there are offsets between the various parts, and the sum is higher than the total revenue). Compared with 2022, the proportion of each business segment in the total revenue has not changed much:
- ICT infrastructure business (providing communication equipment to operators, etc.): revenue of 167.2 billion yuan;
- Terminal business (selling mobile phones, tablets and other hardware): revenue of 103.5 billion yuan;
- Cloud computing business (sale of computing resources, software services, etc.): revenue of 24.1 billion yuan;
- Digital energy business (participating in the construction of photovoltaic power plants, providing equipment or software, etc.): revenue of 24.2 billion yuan;
- Smart car solution business (sales of auto parts, software, etc.): revenue of 1 billion yuan.
The trend worthy of attention is that Huawei’s terminal business increased by 2% year-on-year. Affected by geopolitics in the previous two years, the revenue of this business segment continued to decrease by 60%.
The latest change has to do with growing sales of Huawei phones. According to the statistics of IDC, a market research organization, in the second quarter of this year, Huawei’s share in China’s mobile phone market increased by 76.1% year-on-year, accounting for 13%, close to the fifth-ranked Xiaomi.
“Our mobile phone business is on the way back,” Yu Chengdong said at Huawei’s developer conference last week. Earlier market news said that Huawei will release 5G mobile phones in the second half of the year. (He Qianming)
ByteDance’s profit exceeded 100 billion yuan last year
The Information, a Silicon Valley technology information organization, learned from three people familiar with the matter that thanks to TikTok’s strong performance, ByteDance’s total revenue increased by 38% last year to $85 billion. Among them, the income of overseas business represented by TikTok has increased by 1.5 times to 16 billion US dollars.
Since ByteDance is still controlling costs, last year’s operating profit increased by about 80% to $18 billion, and the 21% operating profit margin is comparable to Meta (25%) and Google (26%). 850 million Chinese active users and 840 million overseas active users (both DAU caliber) are the prerequisites for Byte — or simply Douyin and TikTok — to maintain high commercialization efficiency.
“Wandian Finance” has previously learned that ByteDance’s business revenue in China in 2022 will exceed 400 billion yuan, of which advertising revenue will account for the majority, reaching 330 billion yuan, 80% of which will be contributed by Douyin. The former core Toutiao advertising revenue was only around 20 billion yuan. In addition, ByteDance’s live broadcast business has also exceeded 130 billion yuan.
Abundant cash flow makes Byte less financially motivated for an IPO, but in order to appease investors and some employees who hold shares, Byte will still conduct regular repurchases twice a year. According to Wandian Finance, in the first half of the year, the trading price of ByteDance’s old stock in the primary market was about 220 billion U.S. dollars, which was 40 billion U.S. dollars higher than its last public equity financing valuation at the end of 2020.
However, the company’s geopolitical crisis remains unresolved. Just recently, the overseas version of CapCut, an editing software owned by ByteDance, was hit with a class action lawsuit in Illinois, USA. It was accused of collecting data such as face scans and voiceprints without notifying users or obtaining explicit permission. , which violates the state’s Biometric Information Privacy Act. (Gong Fangyi, Gao Honghao)
China resumes multi-country outbound group tours in the United States and Europe, luxury investors say “welcome”
On Thursday, European luxury stocks rose collectively, with LVMH up 2.6%, Hermes up 2.8%, Kering up 2.2%, L’Oreal up 1.8%, and Rolex retailer Swiss Watch Group up 5.9%.
The market attributed this to China’s further resumption of outbound group tours. According to the Ministry of Culture and Tourism, starting from August 10, there will be 78 new countries and regions where domestic residents can travel in groups, including popular destinations such as Japan, South Korea, the United States, the United Kingdom, Australia, Germany, and Turkey.
Some analysts call it “opening the ‘second stage’ of Chinese luxury consumption.” According to Bain Consulting, in 2018, the Chinese bought about one-third of the world’s luxury goods, and 90% of them took place overseas. By April this year, more than 60% of luxury consumption was still in China. The market expects that with the resumption of group tours, Chinese tour groups will be able to shop around the world in the second half of the year.
The news is not only good for luxury goods, Air France-KLM rose 2.8%, travel service company TUI Group rose 2.4%, and the European Travel and Leisure sub-index rose 1%.
Japanese agencies have also begun to estimate that with the resumption of group tours, it is expected to bring 1.98 million more Chinese tourists this year. In the first half of this year, 594,000 Chinese tourists visited Japan, about 10% before the epidemic. But the industry is concerned about a shortage of reception staff. According to reports, Japanese airlines and railway companies are updating their mechanisms, including enabling a more convenient ticket purchase process, to meet the new wave of tourists. (Lin Guangying)
CHART OF THE DAY | China’s new loans and social financing in July increased by hundreds of billions of yuan year-on-year
On August 11, the central bank released data showing:
- In July, RMB loans increased by 345.9 billion yuan, a year-on-year decrease of 349.8 billion yuan, the lowest since November 2009.
- At the end of July, the balance of broad money (M2) was 285.4 trillion yuan, a year-on-year increase of 10.7%, and the growth rate was 0.6 and 1.3 percentage points lower than the end of the previous month and the same period of the previous year, respectively.
- In July, the increase in the social financing scale was 528.2 billion yuan, 270.3 billion yuan less than the same period of the previous year, and a new low since July 2016. (Qiu Hao)
OTHER NEWS
On August 11, 4615 A-share companies fell.
According to Wind, when the market closed on August 11, a total of 4,615 A-share companies fell and 562 rose. The net selling of northbound funds was 12.3 billion yuan throughout the day, which was the lowest point since October 24, 2022.
Nandu Property and Jinbo Shares jointly issued an announcement saying that the purchased Zhongrong Trust products were overdue.
According to the announcement of Nandu Property on August 11, the 30 million yuan Zhongrong-Huijujin No. 1 Monetary Fund Collective Fund Trust Plan purchased by it has not received the principal and investment income as of the announcement date, and stated that “in view of the investment funds There is still uncertainty in the recovery, and based on the nature of non-principal-guaranteed wealth management products, there is a risk that the principal and interest cannot be fully recovered.” Nandu Property purchased the product on February 9 this year, and the due date is August 8, 2023.
On the same day, Jinbo shares issued an announcement that the principal and investment income of the trust products purchased by Zhongrong-Longsheng No. 1 Collective Fund Trust Plan and Zhongrong-Zerui No. 1 Collective Fund Trust Plan had not been recovered as of the announcement date. , there is a risk that the principal and interest cannot be paid in full or only in part. Jinbo shares purchased 30 million yuan for each of these two products.
On August 4, Xianheng International announced that it had not received part of the principal and income of the three products under Zhongrong International Trust that it had purchased, saying that “in view of the fact that the above-mentioned trust products have expired or are about to expire, the recovery of the remaining investment funds has yet to be completed.” There are uncertainties, and based on the nature of non-principal-guaranteed wealth management products, there is a risk that the principal and interest cannot be fully paid.”
The organizer of the Xi’an Spring Waves Music Festival said it had received notice from superiors to cancel it, but the Bureau of Culture and Tourism said it had not issued a notice.
According to the Weibo of the organizer of the music festival at around 23:00 on August 10: Notification from the local organizer, due to the urgent notice received from the superior department on the control of large-scale activities in Xi’an: the 2023 Xi’an Spring Wave Music Festival will be cancelled. On the 11th, the staff of the Xi’an Culture and Tourism Bureau said in an interview with China News Weekly: Regarding the news that all concerts in the past two months have been cancelled, the Municipal Culture and Tourism Bureau has not received or issued relevant notices, and it is not clear that the Spring Wave Music Festival Specific reason for cancellation. Commercial performances involving foreign countries, Hong Kong, Macao and Taiwan are subject to the approval of the Provincial Department of Culture and Tourism, and others are subject to the approval of specific districts and counties.
The year-on-year increase in core CPI in the United States in July was the smallest in nearly two years, which may indicate the end of the interest rate hike cycle.
The overall CPI in the United States in July was +3.2% year-on-year, unchanged from the previous month. The core CPI (excluding energy and food with large monthly changes) was +4.7% year-on-year, the lowest since October 2021. The continued cooling of inflationary pressures may indicate that the Federal Reserve will stop raising interest rates this year. According to FedWatch data, the probability that the Federal Reserve will keep interest rates unchanged in September is 89.0%, and the next interest rate meeting will be held on September 19-20.
Evergrande Real Estate has a net loss of 52.7 billion yuan in 2022 and a total debt of 1.8 trillion yuan.
On the evening of August 10, Evergrande Real Estate announced its 2022 annual report, with a net loss of RMB 52.7 billion for the year, total liabilities of RMB 1,833.8 billion, and total assets of RMB 1,468.5 billion. Current liabilities are 1,678.7 billion yuan, while the company’s monetary funds (including cash and cash equivalents and restricted funds) total 9.173 billion yuan. The financial report shows that the company has a land reserve of 170 million square meters. Participated in 79 old renovation projects, including 55 in the Greater Bay Area (34 in Shenzhen) and 24 in other cities.
Amazon plans to cut some of its own brands to cut costs and deal with potential antitrust risks.
According to media reports, Amazon plans to significantly reduce the company’s own brands, mainly focusing on clothing and furniture categories, reducing its own brands to less than 20. The move comes after the FTC is preparing to file a lawsuit against Amazon as early as this month, including an investigation into its use of platform dominance to drive third-party sellers out of the market.
The European Union does not plan to follow up on the U.S. ban on technology investment in China immediately.
On August 10, Biden announced an executive order restricting investment in three advanced technology fields in China, including semiconductors and microelectronics, quantum information technology, and artificial intelligence. The EU stated that it does not plan to immediately follow up on the U.S. ban on technology investment in China, but will propose a plan before the end of this year. According to an EU diplomat quoted by the media, many member states “have reservations about following up on such a ban and believe that a proper assessment is required beforehand because it may have a huge impact on the economy”.
Cryptocurrency exchange Bittrex paid $24 million to settle with the SEC.
Cryptocurrency exchange Bittrex was accused by the SEC of being an unregistered securities exchange, broker and clearinghouse in April and has now settled with a $24 million fine, according to media reports. Bittrex, one of the earliest cryptocurrency exchanges, had a market share as high as 23%, which has fallen below 1%.
Audi says the shortage of automotive chips will last for years.
The comment was aimed at TSMC’s plans to build a fab in Europe today. Audi said that they must use various means to stabilize the supply of chips, and to a certain extent stock up through dealers. Although TSMC plans to build a factory in Germany, “this will take many years and require an investment of about billions of dollars.” Dollar”.
The U.S. Supreme Court says Apple can keep the App Store’s fee rules for now.
The U.S. Supreme Court rejected “Fortnite” publisher Epic’s proposal to allow developers to use third-party payment platforms in their applications. Previously, Epic sued Apple in 2020, claiming that it violated anti-monopoly laws, and asked Apple to change the commission strategy of the App Store, allowing consumers to use third-party payment platforms to purchase digital content, reducing commissions by 30%, etc. According to agency estimates, the App Store will generate between $70 billion and $85 billion in revenue for Apple in 2022.
Coach intends to acquire the parent company of Michael Kors and Jimmy Choo.
Tapestry, the parent company of Coach and Kate Spade, announced that it will acquire Capri Group, which owns Michael Kors, Jimmy Choo and Versace, for $8.5 billion. For this merger, Tapestry’s CEO said, “After the merger, the annual revenue of the two companies will exceed 12 billion US dollars. Michael Kors will help attract younger customers, and Jimmy Choo and Versace will meet the needs of high-end customers.”
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