(Bloomberg) -- China Vanke Co.’s sales slump worsened in August amid concerns about the developer’s ability to repay debt.
Contracted sales declined 24% from a year earlier to 17.24 billion yuan ($2.4 billion), widening from a 13% slide in July, the company said in a statement on Friday. Transactions shrank 10% on month.
Vanke’s liquidity levels have faced renewed scrutiny after the developer posted its first loss in two decades. It had a short-term refinancing gap of about 12 billion yuan at the end of June due to a spike in long-term debt due within a year, according to Bloomberg calculations based on company data. That’s the first time Vanke’s cash balance has failed to cover interest-bearing debt maturing in less than a year since at least 2014.
A sales slump “could endanger Vanke’s solvency in 2025 and 2026,” Bloomberg Intelligence analysts Kristy Hung and Monica Si wrote in a note this month.
Vanke’s earnings report last month showed how much the extended housing slump has taken its toll on China’s fourth-biggest developer by sales. The company posted a net loss of 9.85 billion yuan for the six months ended June 30, its first semi-annual loss since at least 2003. That’s higher than the upper range flagged by the firm in July, and compares with an annual profit of 12.2 billion yuan last year.
Its loss signals its finances took a sharp hit in the second quarter, considering it lost just 362 million yuan in the first three months. The slowdown in China’s market has deepened since then, as sales and prices continue to decline. Local governments are dialing back intervention over pricing of new residential projects, driving developers to offer deep discounts to lure buyers.
Vanke’s month-on-month decline in home sales compares to the 27% slide at the 100 biggest real estate companies tracked by China Real Estate Information Corp.
--With assistance from Foster Wong.
©2024 Bloomberg L.P.
