Longfor Group, a major player in China's real estate sector, is set to make early repayments of 6 billion yuan on bonds due in early 2025 and settle 1 billion yuan in onshore public bonds this year. Despite avoiding default, the company reported a 28% decline in core profit to 4.75 billion yuan (USD 665.53 million) for H1 2024, reflecting ongoing market struggles. Longfor's shares fell 0.5%, slightly less than the Hang Seng Mainland Properties Index's 0.7% drop. The company plans to diversify revenue sources, aiming for non-property operations to become its largest revenue segment by 2028.
Longfor Group, a notable player in China's property market, is taking proactive steps to manage its finances amid the country's ongoing real estate challenges. The company has announced plans to make early repayments on its loans this year, a strategic move that aims to lower its short-term debt significantly.
Unlike many of its competitors, Longfor has avoided defaulting during the sector's debt crisis. This success is largely attributed to its strategy of concentrating development efforts in larger cities. These urban areas have shown more robust sales than smaller cities, allowing Longfor to maintain a steadier cash flow as the market fluctuates.
However, the company has not been immune to the broader economic pressures. In its recent financial report, Longfor revealed a 28% decline in core profit for the first half of the year, amounting to 4.75 billion yuan (approximately USD 665.53 million). This decrease is largely due to falling sales and profit margins, reflecting the ongoing struggles within the real estate market. Following this announcement, Longfor's shares fell 0.5%, which is a slight decline compared to the 0.7% drop seen in the Hang Seng Mainland Properties Index.
The Chief Financial Officer, Zhao Yi, emphasised the company's liquidity position, stating that Longfor has sufficient cash to repay onshore public bonds totaling 1 billion yuan, maturing this year. Additionally, the company plans to make early repayments of 6 billion yuan on bonds that are due in early 2025. Longfor is also preparing to settle a remaining 7 billion yuan from an offshore syndication loan due in January, further streamlining its financial obligations.
In a forward-looking move, Longfor aims to diversify its revenue sources and reduce reliance on property sales. The company plans to increase the contribution of its non-property development operations, such as investment properties and property services, to its total revenue. Currently, these areas account for about 28% of revenue, but Longfor aspires for them to be the largest revenue source by 2028. This shift is expected to enhance cash flow and profit margins, providing a more stable financial foundation during uncertain times.
Longfor's ability to adapt to changing market dynamics is a critical factor in its ongoing strategy. As the Chinese property market remains volatile, companies like Longfor that focus on financial health and diverse revenue streams may emerge stronger. Their approach provides a glimpse into potential recovery strategies for other developers navigating similar challenges in the market.
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