Sunac Services Holdings posted a loss of 462.4 million yuan (US$67.1 million) last year, but expressed confidence that its performance would improve this year amid a recovery in China’s economy from the Covid-19 pandemic, according to its filing with the Hong Kong stock exchange on Monday.
The property services unit of Sunac China Holdings, mainland China’s fourth-largest developer, cited “recurring pandemic outbreaks and the continuous downturn of the real estate industry” for the pressures and challenges it faced in an “unusual” year as it swung to a loss from a 1.35 billion yuan profit in 2021.
“In 2023, China will see a pickup in its macro economy as favourable policies are leading to a gradual recovery of the real estate industry from setbacks, and the optimised Covid-19 prevention and control measures have ensured people’s daily lives and well-being,” the company said. “As a result, the property management industry will experience better development.”
Sunac Services declared a final dividend of 0.137 yuan per share for 2022 despite posting a loss, with the total payout amounting to 419 million yuan or about 55 per cent of the core net profit attributable to the owners. Sunac Services’ shares closed about 1.6 per cent lower on Monday.
Beijing’s strict zero-Covid policy caused growth to slow down in the world’s second- largest economy as routine lockdowns hobbled business activities for the better part of 2022.
Sunac China, the parent of Sunac Services, won the approval of its domestic bondholders in January to roll over 10 domestic bonds amounting to 16 billion yuan or 85 per cent of all its local-currency debt, extending their terms for another 3.5 years to meet its obligations.
Sunac China had 1.05 trillion yuan of liabilities at the end of 2021, including almost 322 billion yuan of borrowings that had increased from 303 billion yuan a year earlier. They included 18.8 billion of local-currency bonds, according to its 2021 annual report published in December. Its unrestricted cash had dwindled to 14.3 billion yuan from 98.7 billion yuan over the same period, as home sales plunged.
In December, Sunac China also proposed to convert most of its US$11 billion of offshore debt into equity and new long-term bonds to survive the crisis. The following month, it sold its stake in a Shenzhen snow park project to further reduce its debts.
Assets such as the Guangzhou Sunac Land Resort theme park and a high-end project in Chongqing’s Jiangbeizui area called A-ONE were also pledged to creditors as a way to guarantee repayment during the rollover period.
Mainland China’s property market has faced tough times since 2020 after Beijing introduced the “three red lines” policy, a set of requirements intended to curb risky borrowing. Unable to tap more loans, China Evergrande Group and other developers have defaulted on their bond payments.
In November, the central government stepped in to support beleaguered developers by firing “three arrows” of policy support – bank credit, bond issuance and equity financing.