Wharf (Holdings) slashes China home sales guidance amid tough operating environment
- Wharf (Holdings) expects to sell US$1.4 billion worth of homes in mainland China, the lowest since US$805.5 million in 2011
- The company’s underlying net profit last year increased by 7 per cent to HK$3.65 billion
Hong Kong-listed Wharf (Holdings) has cut its home sales guidance in mainland China to 9 billion yuan (US$1.4 billion), the lowest in over a decade, amid an uncertain market outlook, low supply and price controls.
This came after its property sales on the mainland fell 20 per cent to 13.9 billion yuan for the year ended December 2021, according to an exchange filing on Wednesday. The company sold 3,625 units totalling 452,000 square metres, which mainly came from projects in Hangzhou and Suzhou.
“For many years, we have not experienced mainland property sales of less than 10 billion yuan,” chairman and managing director Stephen Ng Tin-hoi said at a briefing. “For the past eight to 10 years, we sold over 10 billion yuan [each year].”
The last time the company’s revenues from property sales in China came under 9 billion yuan was in 2011 when sales stood at HK$6.3 billion (US$805.5 million).
“On the one hand, our supply [this year] is lower. On the other hand, we thought the market was weaker than a couple of years ago. This year’s market is definitely not a situation easy to deal with.”
China’s US$1.7 trillion property market has been struggling for the past few months. The value of overall contracted sales at the country’s top 100 developers slumped 47.2 per cent year on year in February to 401.6 billion yuan, according to data from China Real Estate Information Corporation. A month earlier sales had plummeted by 41 per cent. Moody’s expects home sales across the country to fall by 5 per cent to 10 per cent for the whole year.
As strict price controls and other regulatory policies in China have increased investment risk, Wharf said it has become more selective with new land acquisitions while the market is still undergoing correction.
The company’s underlying net profit for the year increased by 7 per cent to HK$3.65 billion, compared with HK$3.42 billion in the previous year.
In lieu of a final dividend, the company will pay a second interim dividend of HK$0.2 per share.
Ng said that since last year the company had noticed a deterioration in the investment environment and considerable latent concerns surrounding the economy. As a result it had reduced debt levels by liquidating some liquid investments like stocks.
Wharf has reduced its debt by nearly HK$30 billion, cutting some HK$12 billion to HK$13 billion last year alone, Ng said, adding that net debt to total equity fell to 8 per cent.
“In retrospect, after it [stock divestments] was done, the fifth wave of the outbreak in Hong Kong and [Ukraine’s invasion] took place,” he said. “The decision proved fortuitous.”
He also said that in the first two months of this year, Wharf had further reduced its debt by several billion dollars and pointed out that as the current debt load was not high, the remaining long-term investments can be maintained.
On Russia’s invasion of its neighbour Ukraine, Ng noted that while Ukraine did not have close economic links with Hong Kong, the war will have a wide-reaching impact on the world economy, leading to increases in prices of energy and commodities like food and wheat.
