Chinese property developer Country Garden (COGARD) said that it expects a 70% net profit dip to RMB 4.5-5.0bn ($660-740mn) in 1H 2022. Last year, the company posted a profit of RMB 15.2bn ($2.2bn) in 1H 2021. A tough business environment, financial stress in the real estate sector and the impact of the pandemic on the economy are said to be the primary reasons for the 38.5% decline in contracted sales to RMB 184.8bn ($27.1bn) in 1H 2022. Natixis’ economist Gary Ng said, “Country Garden’s profit warning shows the massive pressure on China’s real estate sector from tight regulations and a zero-COVID policy, especially for private developers. It means Country Garden will not be alone, and China’s real estate sector is far from out of the woods.” Most recently Chinese asset manager Huarong also issued a $2.8bn H1 loss warning on property sector worries, indicating the dire situation across the space. Prior to Huarong, COGARD’s peers namely, Zhenro Properties and Central China Real Estate issued loss warnings, expecting losses of RMB 2.5-3bn ($368-442mn) and RMB 5-6bn ($737-884mn) for 1H 2022 respectively. This comes just days after COGARD lost its IG-status with a downgrade from Fitch to BB+.

The developer’s 5.625% dollar bonds due in 2026 are trading 0.55 points lower at 35 cents to the dollar.

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