In 2024, Vanke Reported a Significant Loss of Nearly 50 Billion Yuan; Management Expresses Commitment to Properly Address Debts Maturing in 2025 (AI Translation)

2024年万科巨亏近500亿元 管理层表态妥善处理2025年内到期债务

[para. 1] China Vanke Co., Ltd., one of the major players in China's real estate industry, is grappling with severe liquidity problems and substantial operational losses. According to its financial report for 2024, the company experienced a devastating loss of approximately 49.478 billion yuan in net profit attributable to shareholders. This marks a significant downturn from its 2023 performance when its net profit was recorded at around 12.163 billion yuan, illustrating a year-on-year decline of an alarming 506.79%.

[para. 2] Vanke's profitability had been escalating steadily since it got listed in 1991, with net profit peaking in 2020 at 41.516 billion yuan. However, this trajectory was disrupted in the second half of 2021, when the real estate sector underwent a considerable shift. Consequently, in 2024, Vanke reported its first annual loss since going public, attributing its performance challenges to both external factors within the market and internal inefficiencies.

[para. 3] Facing a complex array of risks and challenges, Vanke has seen its management and risk control mechanisms struggle to keep up with its operational and organizational needs. In particular, the company's high-debt, high-turnover, and high-leverage expansion strategy was highlighted as failing to adapt to the changing economic conditions swiftly enough.

[para. 4] In early 2025, Shenzhen state-owned capital took complete control of Vanke. When releasing its 2024 report, Vanke deviated from its usual routine of holding a performance meeting and instead conducted a meeting with select analysts, indicating a shift in its communication strategy. Executives discussed the governmental and local support aimed at stabilizing Vanke's circumstances and boosting market confidence during this period.

[para. 5] Vanke's recovery strategy prioritizes management enhancements, including more vigorous receivables collection and revenue enhancement, as well as loss reduction measures. Vanke's real estate development business saw a significant decline in settlement area and revenue in 2024, with gross margins dropping markedly.

[para. 6] A substantial factor in Vanke's dramatic financial decline was the significant provision made for asset and credit impairments, which in total exceeded 30 billion yuan. Notably, the credit impairment provision saw a dramatic 68.84-fold increase compared to 2023, aggregating at 26.398 billion yuan.

[para. 7] As Vanke's other receivables mainly involve land and business partner transactions, and interest/dividend incomes, they became noteworthy for bad debt potential. Its reported accounts receivable from partners indicated a decrease, suggesting possible issues with bad debts impacting profitability.

[para. 8] Aside from asset impairments, Vanke incurred a notable net loss partially due to aggressive discounting in asset disposals during 2024, resulting in a financial pressure intensification. Large asset loss instances include transactions like the sale of the Shenzhen Bay Headquarters site.

[para. 9] Short-term liquidity problems for Vanke have been compounded by increased interest-bearing liabilities, which totaled 361.28 billion yuan by the end of 2024. A notable shift was the preference for bank loans over public debt, as observed with the increased bank loan figures compared to previous years.

[para. 10] In light of dwindling accessible funds, Vanke's operational woes have led to increased reliance on government and major shareholder interventions. Financial support from Shenzhen Metro helped Vanke deal with some immediate financial obligations, such as public debt repayments.

[para. 11] The state-owned enterprise-supported restructuring process aims to foster necessary reform, risk mitigation, and operational stability. Vanke strives for efficient reallocation, asset revitalization, liability reduction, and governance standardization, moving towards a transparent operational posture.

[para. 12] With Shenzhen Metro providing significant liquidity through shareholder loans and other support avenues, Vanke continues to act on strategies like asset securitization to improve liquidity. Vanke also seeks cooperation with financial institutions to manage debt, emphasizing the use of market mechanisms for financial stability and long-term operational sustainability.