Vanke Reports Half-Year Loss of 9.85B Yuan

The real estate industry leader Vanke, on the evening of August 30th, announced its financial report for the first half of 2024.

The report shows that Vanke's operating income for the first half of the year was 142.78 billion yuan, a year-on-year decrease of 28.9%; the net profit attributable to shareholders of the listed company was a loss of 9.85 billion yuan, a year-on-year decrease of 199.8%.

The amount of loss is indeed significant.

It should be noted that in the first quarter of 2024, Vanke only had a loss of 360 million yuan, and the loss in the mid-year report is likely to exceed the expectations of the vast majority of investors.

Of course, the concern of a net profit of -1.675 billion yuan in the first quarter report actually laid the groundwork for the continued huge loss in the mid-year report.

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Regardless, for the 580,000 shareholders, it was a very painful weekend.

As for the reasons for the huge loss, Vanke gave four reasons: 1.

A significant decline in the settlement scale and gross margin of real estate development projects; 2.

Provision for impairment; 3.

Losses from some non-core financial investments; 4.

Losses from some bulk asset transactions and equity transactions.

Among them, in the provision for impairment, it is mentioned that a provision for inventory depreciation of 2.1 billion yuan was made for some projects in the mid-term.

In addition, a credit impairment loss of 2.1 billion yuan was provided for some receivables.

This means that Vanke has a loss of 4.2 billion yuan just in the provision for impairment.

Moreover, the main part of the loss is likely related to the continuous decline in housing prices.

Data from the National Bureau of Statistics shows that the sales area of commercial housing in the first half of the year was 480 million square meters, a year-on-year decrease of 19%; the sales amount was 4.7 trillion yuan, a year-on-year decrease of 25%.

The decline in sales amount is 6 percentage points higher than the decline in sales area, mainly due to the continuous decline in prices.

Vanke's huge loss in the first half of 2024 is mainly due to the fact that product sales profits can no longer cover the company's costs.

The provision for impairment is actually caused by this reason, and it can be foreseen that some receivable projects and inventory projects will lose money at the current sales price.

It is indeed very understandable for real estate companies to have this situation, after all, domestic housing prices have been continuously declining for three years, and it is still difficult to say that they have bottomed out.

Yu Liang, the chairman of Vanke Group's board of directors, pointed out at the performance explanation meeting that the area of new residential starts in the first half of this year decreased by 24% year-on-year, and the new construction area was about 500 million square meters, which is only equivalent to the national new start level in 2005.

The shortage of new housing supply will eventually lead to a fundamental change in the supply and demand relationship.

I hope this day will come sooner, but at least in the medium term, the real estate industry chain may still need to tighten its belt and live a hard life.

It should be noted that this is the first time Vanke's semi-annual report has shown a loss since the deep adjustment of the real estate industry in this round, and it will not be surprising if it is also the first year to show a loss.

For many real estate companies, it is already very good to have survived until now.

Let's compare the situation of several leading real estate companies listed in the mainland.

Poly Development is still the most stable, although the net profit in the first half of 2024 decreased by 39%, there is still a net profit of 7.4 billion yuan, and it has always been able to maintain profitability since the large adjustment of the real estate industry in this round; the situation of Greenland Holdings is much worse, with a loss of 9.556 billion yuan in the whole year of 2023, and only 209 million yuan in the first half of this year; the situation of Gemdale Group is similar to Vanke, with a loss of 3.36 billion yuan in the first half of this year, which is the first loss.

Since the large adjustment of the real estate industry in 2021, the first to fall are the highly leveraged real estate companies, mainly manifested by the breakage of the capital chain.

At present, it is already a blessing that these enterprises can survive.

Another batch of leaders with more stable risk control have felt the pain in the following years, Greenland Holdings suffered a huge loss last year, Gemdale, Vanke began to suffer a huge loss in the first half of this year, which is probably related to the high price of land in the previous years, and the continuous decline in housing prices cannot cover the land cost of some projects.

If housing prices continue to decline, the risk of continuing to provide for impairment may still be there.

Of course, the domestic housing prices that have fallen for three years obviously have much less room to fall than the past three years.

Although it may be approaching the bottom, it may still take a long time to get out of the predicament.

The real estate industry has undergone significant changes, the main body of participation is rapidly shrinking, and the era of the remaining king is gradually opening up.