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Shares of Country Garden Holdings Co.
2007,
fell Thursday morning in Hong Kong after the Chinese property developer warned of a big drop in first-half net profit.
Shares declined 4.4% to HK$2.41, taking year-to-date losses to 65%.
The developer said it expected to post net profit between 200 million yuan and CNY1.00 billion ($29.5 million-$147.5 million) for the first six months, compared with CNY15.00 billion net profit in the year-earlier period. Core net profit is forecast at CNY4.50 billion-CNY5.00 billion, down from CNY15.20 billion a year earlier.
Country Garden attributed the expected drop in net profit to a decrease in property sales amid a market downturn and a slowdown in construction. The company also increased its impairment provision for property projects and said it was hurt by a weaker profit margin and expected foreign-exchange losses.
But the developer added that most of these factors were noncash in nature and its operation was “in good condition with sufficient cash available” and cash flow remained stable.
Fitch Ratings this week downgraded the private developer’s credit rating to BB+ from BBB- to reflect “a weakening in Country Garden’s financial flexibility due to challenges in China’s property sector.” The ratings firm said that declining sales and working capital commitments weighed on the company’s cash generation.
