A growing number of Chinese property developers this week said they will be unable to publish audited 2021 earnings statements on time, deepening market concerns over the sector’s financial troubles.
Indebted Kaisa Group Holdings Ltd. became the latest developer to disclose that it will most likely miss the deadline for reporting audited financial results due this month. Another new COVID-19 wave in China disrupted audit work, the company said on Tuesday in a stock exchange filing.
Trading of Kaisa’s shares in Hong Kong will be suspended as of April 1, the filing added.
As required by listing rules, Chinese property firms listed in Hong Kong face a March 31 deadline to file annual results, their first audited financial statements since the industry’s liquidity crisis spread.
Kaisa, the second-largest U.S. dollar bond issuer among Chinese property developers after China Evergrande, is restructuring its $12 billion offshore debt after defaulting on some bonds last year.
China Evergrande Group also said on Tuesday it would be unable to publish results on time owing to the “drastic changes” in its operational environment since the second half of last year, its auditor added “a large number of additional audit procedures” this year.
Since Monday, trading in Evergrande and its two Hong Kong-listed subsidiaries has been halted. The developer is crumbling under the weight of more than $300 billion in liabilities.
Sunac China Holdings Ltd. and Shimao Group Holdings Ltd., which placed third and 12th in property sales last year, announced Monday that they will delay publishing audited results, but will release unaudited results on March 31 to keep their shares trading.
Certain developers have delayed results due to changing auditors. Ronshine China Holdings Ltd. said on Monday that auditor PwC had resigned, in part because the supply of requested information had fallen behind schedule.
Analysts said failure for companies to issue timely 2021 results will further dampen industry sentiment, which has already been harmed by liquidity concerns in recent months.
JP Morgan said in a note that auditors’ more stringent checks on project booking/debt may have also led to the delay, reported Reuters.Japanese bank Nomura said in a Monday note that it typically raises red flags when companies change auditors ahead of earnings announcements and that such practice causes serious market concern about trustworthiness.
In the past two months, developers such as Aoyuan, Shanghai Shimao, and Hopson also announced a change of auditors.
The chances of more developers failing to release financial results on time are increasing, Nomura predicted, since several developers have not scheduled the relevant board meetings.
JP Morgan also stated that it would not be surprised to see more delays; even for companies that have announced board meeting dates, there is still the possibility of a delay in results if auditing processes are not completed by then.
Delaying financial results would pose risks to banks and creditors because of potential breaches in lending clauses.
This year, China’s home sales by leading developers have continued to slump. According to researcher CRIC data, home sales at the top 100 real estate firms declined by 47 percent in February compared to the same period last year.
Evergrande’s sales fell by more than 90 percent in the first two months of this year, the data showed, Shimao fell by 60 percent, and Sunac fell by 26 percent.
Reuters contributed to this report.
