China Evergrande Group warned that its real estate wing recorded a loss in the first half of the year for the first time since at least 2009.
The company’s property business incurred a loss equivalent to about $618 million, according to the Wall Street Journal. The parent company is the world’s most indebted developer with around $300 billion in liabilities and around $7.4 billion in bonds maturing next year.
Evergrande started discounting apartments at its developments last spring, hoping to sell more units. Some were discounted as much as 25 percent.
The wider conglomerate managed to still post a profit of $1.4 billion to $1.6 billion in the first half, thanks to gains from the sale of shares in Hong Kong-listed company HengTen Networks Group, and the value of its remaining interest in the company.
Still, Evergrande’s stock is down about 70 percent since the beginning of the year.
The company’s financial troubles have made it something of a poster child for China’s indebted property sector. The Chinese government has adopted a suite of regulations meant to bring the sector back from the brink of a bubble.
Earlier this month, the government barred private equity funds from investing in real estate, cutting off a major source of funding for builders.
The company’s electric vehicle business, China Evergrande New Energy Vehicle Group, also lost the equivalent of $741 million. The EV company’s valuation was estimated as high as $80 billion earlier this year and now sits at around $6.5 billion.
[WSJ] — Dennis Lynch
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