Chinese Developer Vanke Posts First-Ever Annual Loss as Liquidity Problems Pile Up

[para. 1] China Vanke Co. Ltd., once a leading real estate company in China, reported its first-ever annual loss, indicating significant challenges in China's troubled property industry. [para. 2] The company, based in Shenzhen, experienced a dramatic 506.79% decrease in net profits, resulting in a 49.48 billion-yuan loss (approximately $6.82 billion) in 2024. This setback was due to severe liquidity issues, substantial asset and credit impairments, and an overall market downturn that hit its operations hard, even after a full takeover by the Shenzhen state-owned capital. [para. 3] This marked a significant shift from its past performance, as Vanke had been reporting growing profits since its 1991 listing, with profits reaching a peak of 41.52 billion yuan in 2020. [para. 4] According to Vanke's annual report to shareholders, 2024 was an extraordinarily difficult year full of risks and challenges. [para. 5] The company acknowledged a marked change in China's real estate supply-demand dynamics but admitted to not abandoning its aggressive expansion model heavily reliant on high debt and turnover.

[para. 6] Strategic errors included ambitious investments, vast multi-sector ventures, and delayed adjustments in its financing strategy. Vanke recognized that its management and risk control mechanisms were inadequate, failing to keep up with business growth as market conditions worsened. [para. 7] Its liquidity crisis remains unresolved, prompting a full takeover by the Shenzhen government in early 2025 to place the company’s future in public hands. [para. 8] Notably, Vanke did not hold an earnings call after disclosing its 2024 results, with top executives choosing private meetings with brokerages to discuss the company's performance. [para. 9] The company stated that both local and national authorities are closely monitoring Vanke’s financial status and providing necessary support to stabilize operations. Shenzhen Metro Group Co. Ltd., Vanke's largest shareholder, has been leading efforts to restore confidence and facilitate restructuring.

[para. 11] Vanke's sharp financial loss was primarily driven by over 30 billion yuan in asset and credit impairments. [para. 12] Declining home deliveries and decreased gross margins led to setting aside 7.17 billion yuan for asset impairments, doubling from the previous year, but the significant impact came from a 26.4-billion-yuan credit impairment charge, 69 times higher than in 2023. [para. 13] In 2024, Vanke observed a 30% drop in its development floor area and a revenue fall to 279 billion yuan. [para. 14] Joint projects suffered profit declines, particularly in high-equity projects, intensifying impairment losses. [para. 15] An aggressive asset sale program also resulted in losses, with steep discounts on sales compounding financial challenges.

[para. 19] At the end of 2024, Vanke faced mounting short-term debt pressures, with 158.2 billion yuan in interest-bearing debt maturing within a year, making up nearly 44% of its total debt. [para. 21] To manage obligations, Vanke raised or refinanced 94.8 billion yuan in 2024, which included a 20 billion yuan syndicated loan. However, its cash reserves are rapidly diminishing, down to 88.2 billion yuan, with parent-level cash reserves dropping significantly. [para. 22] The company depended heavily on state support, with Shenzhen Metro injecting 7 billion yuan and supporting debt repayments. [para. 23] Looking forward, Vanke aims to manage project development closely, boost home sales, and explore asset securitizations and partnerships to fill the liquidity gap, with Shenzhen Metro expected to continue as a strategic ally.