Evergrande Real Estate Group Ltd., China’s biggest developer by sales volume, posted a 28 percent decline in 2012 underlying profit after the developer cut prices as the government implemented property curbs.
Profit excluding valuation gains or losses fell to 6.2 billion yuan ($1 billion) from 8.6 billion yuan, the company said in a statement to the Hong Kong stock exchange today. That compares with the 7.7 billion yuan median estimate of five analysts surveyed by Bloomberg. Revenue jumped 5.4 percent to 65.3 billion yuan.
Evergrande’s earnings declined as home prices were hit the most in China’s less affluent third-tier cities where the Guangzhou, southern China-based company focused its expansion last year. Prices in the eastern city of Wenzhou dropped 11 percent last month from a year ago, leading declines among 70 cities the government tracks.
“The developer had to cut prices to meet sales target last year,” Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd., who has a neutral rating on the stock, said before today’s earnings. “While home prices recovered in major cities, the property markets of smaller cities which it focuses are still lagging behind.”
Evergrande sold a total of 15.5 million square meters (167 square feet) of properties during 2012, up 27 percent from a year earlier, the most among Chinese developers, it said today.
The company started marketing 58 new projects in 52 second and third tier cities last year, it said.
“The group will will maintain strong sales efforts from the beginning of the year, set more proactive internal sales targets monthly, and review and adjust specific sales policy according to market conditions at any time to ensure strong growth in annual contracted sales,” Chairman Hui Ka Yan said in the statement today.
The developer set the sales target of 100 billion yuan for the year, compared with 92.3 billion yuan in 2012, it said.
The company said in January that it plans to sell 1 billion shares at HK$4.35 each, and will use the proceeds to repay debt and for working capital.
China imposed its toughest curbs in a year on March 1, ordering the central bank to raise down-payment requirements and interest rates for second mortgages in cities with excessive price gains. It also enforced a property sales tax and told local governments with the biggest price pressures to tighten home-purchase limits.
Evergrande shares were unchanged at HK$3.49 at the close in Hong Kong. It has lost 18 percent this year.
The developer will not pay a final dividend.