Sunac China, one of China’s major property developers, has reported a narrower net loss of 13.86 billion yuan ($2.02 billion) in 2022, compared to its net loss of 32.4 billion yuan ($4.71 billion) in the previous year. The company attributed the decline in net loss to its decision to slow down project construction and the increased interest expenses it incurred.
The company’s revenue for the year was 162.6 billion yuan ($23.66 billion), a decrease of 5.5% compared to the previous year. Sunac China’s gross profit margin was 33.5% in 2022, a slight increase from 32.5% in the previous year. The company’s total debt as of the end of 2022 was 699.5 billion yuan ($101.7 billion), an increase of 6.8% from the previous year.
Slowdown in project construction leads to narrower net loss
Sunac China’s decision to slow down project construction was a key factor in its narrower net loss in 2022. The company’s CEO, Sun Hongbin, had previously announced that the company would focus on reducing its debt and strengthening its financial position by slowing down project construction and selling assets. The company’s decision to reduce its debt was made after its debt levels increased rapidly due to aggressive expansion in previous years.
Sunac China has also been impacted by the Chinese government’s efforts to curb property speculation and control rising property prices. In response to these measures, the company has slowed down the pace of its project construction in order to reduce its inventory of unsold properties.
Higher interest expenses also contribute to net loss
Sunac China’s net loss was also impacted by higher interest expenses incurred during the year. The company’s total interest expenses for 2022 were 18.2 billion yuan ($2.65 billion), an increase of 18.1% compared to the previous year. The increase in interest expenses was mainly due to higher borrowing costs as the company continued to refinance its debt.
In addition to reducing its debt, Sunac China has also been exploring other ways to raise funds, such as selling assets and issuing bonds. The company issued $1.5 billion in bonds in March 2022, which were oversubscribed by 6.5 times.
Conclusion
In conclusion, Sunac China’s decision to slow down project construction and focus on reducing its debt has led to a narrower net loss in 2022. The company’s efforts to raise funds through issuing bonds and selling assets have also been successful. However, the company continues to face challenges from the Chinese government’s measures to curb property speculation and rising property prices. Sunac China will need to carefully manage its debt levels and continue to explore new ways to raise funds in order to remain competitive in the market.
