On April 14, at the investor exchange meeting held by Vanke for the specific target research of CICC, CITIC, Morgan Stanley and other securities firms, Vanke's management admitted that it has indeed encountered phased operating difficulties and short-term pressure on liquidity. This is the first public admission by Vanke since the debt crisis was exposed in March, and said that it will be based on self-help and ensure the delivery of the building.
Three reasons caused Vanke to be trapped
At the investment meeting, Yu Liang, chairman of the board of directors of Vanke, led Zhu Jiusheng, president of Vanke, and Zhu Xu, secretary of the board of directors, to respond to Vanke's current situation, Yantai report, and rumors that the management was under border control.
From the perspective of operation, Vanke's management said that at present, Vanke has indeed encountered phased operating difficulties and short-term pressure on liquidity, but Vanke has formulated a package of plans to stabilize operations and reduce liabilities, which can properly resolve these phased pressures.
"We will first be based on self-help, based on our own capabilities and resources to self-resolve risks, all the business in hand, all reopen and review, classify and sort out, and formulate targeted plans. Secondly, we have made full use of the various existing financing tools, and we have actively mobilized all front-line forces to make good use of a series of policy-based financing tools issued by the central government that are conducive to the industry's risk resolution. During this period, we have received understanding, support, guidance and help from financial institutions, and we are grateful. Here, I also solemnly promise that all projects of Vanke Group will be delivered on time and with high quality. ”
Vanke believes that although there are reasons for changes in the external market, it is more due to the fact that the company itself still maintains the inertia of expansion and fails to adjust in time when the macro situation and industry conditions have undergone major changes.
To sum up, there are three main problems:
First, although Vanke was the first in the industry to realize the need for transformation and development, put forward the business philosophy of "attaching equal importance to development, operation and services", and actually laid out a number of business service businesses and formats based on its own main business and in line with national policy guidance, there were problems of too big steps and too hasty in the actual operation process. The transformation business exceeded Vanke's ability to match resources, occupied too much development business funds, and the scale was too large, resulting in the management ability not keeping up, and the business objectives could not be achieved as planned.
Second, although the company realized earlier in the industry that the rapid growth would eventually end, the follow-up behavior failed to get rid of the inertia of the industry, and in many cities, including some key cities and first-tier cities, there were investment ventures and mistakes. After the central government clearly put forward the high-quality development goals and requirements of the industry, it failed to make a more thorough adjustment to the "three highs" model that prevailed in the industry, resulting in a passive situation today.
Third, after the central government made a clear strategic judgment on the fundamental changes in the relationship between supply and demand in the industry, and introduced a series of important policies and measures for the transformation of the new development model of the industry, Vanke's understanding of the trend changes in the financing model was not comprehensive and thorough, and the Group has started the adjustment of the real estate financing model, but it still needs a process to shift from the total credit financing to the new financing model.
Total liabilities of 1.1 trillion yuan Some of the bank's borrowings have been extended
As of the end of December 2023, Vanke Group's total assets were about 1,504.8 billion yuan.
Of particular interest in the breakdown of assets is the status of their inventories. Its total inventory was 701.7 billion yuan, accounting for 46.6% of total assets, a decrease of 22.6% from the end of 2022. In addition, Vanke has taken a cautious approach to potentially risky projects, adding an additional provision of RMB3.49 billion for inventory decline in 2023, which directly affected the net profit attributable to shareholders of the parent company by RMB2.95 billion, while the balance of the reserve for inventory decline at the end of the period totaled RMB7.99 billion.
In terms of liabilities, Vanke Group's total liabilities at the end of the period amounted to RMB1,101.9 billion, including interest-bearing liabilities totaling RMB320 billion, accounting for 21.3% of total assets, and were dominated by medium and long-term liabilities. Among them, the interest-bearing liabilities due within one year were 62.4 billion yuan, accounting for 19.5% of the total interest-bearing liabilities, and the remaining interest-bearing liabilities of more than one year were 257.63 billion yuan, accounting for 80.5%.
In terms of the distribution of financing sources, bank borrowings accounted for 61.7%, bonds payable accounted for 24.8%, and the rest of the borrowings accounted for 13.5%. It is worth noting that after excluding contract liabilities, Vanke's net debt ratio is 54.66%, which is within a relatively safe range.
At the performance report meeting in March, Zhu Jiusheng revealed that the bank gave Vanke a grace period to gradually change in 1-3 years.
Vanke said real estate could never return to its high points
Yu Liang, chairman of the board of directors of Vanke, also said that in the short term, the market is obviously over-falling. The industry has not been able to return to the previous high, and the industry market is still broad. In Yu Liang's view, the current policies to support the real estate market have been introduced in large quantities, more than in previous years, with the effect of the policy, I believe that the market will gradually recover.
Until the market recovers, how to "survive" is more important. At present, Vanke has shifted from the pursuit of scale and profit to the pursuit of safe survival.
Yu Liang further said that Vanke will increase efforts to revitalize the stock and change the real estate, and reduce interest-paying debts by more than 100 billion yuan in the next two years to ensure the safety of the company. This year, Vanke broke the 31-year-old practice and made the difficult decision not to pay dividends, which is also to create conditions for this very important work.
Yu Liang believes that with the company's current capabilities, it can better and longer create value for shareholders after traveling lightly. "Since the fourth quarter of last year, Vanke has received care and help from Shenzhen state-owned assets, financial institutions, partners and market parties, and is very grateful for these goodwill and support, and Vanke is also grateful for the criticism from the outside world. Vanke's management team will not lie flat and will cross this threshold to turn Vanke into a better company. ”
Zhu Xu revealed that after the exchange and communication meeting of financial institutions in November last year, Shenzhen State-owned Assets coordinated a number of state-owned enterprises and Vanke docking, and adopted four major types of measures to help and support Vanke in a market-oriented and legal way.
Specifically, it includes: 1) helping Vanke to dispose of relatively illiquid real estate and long-term equity investments, 2) subscribing to Vanke's SCPG Consumer Infrastructure REIT in a market-oriented manner, and 3) promoting cooperation in multiple projects through industrial synergy between Shenzhen state-owned enterprises and Vanke. 4. Actively coordinate financial resources to support Vanke.
If all the above projects are completed, it is expected to help Vanke release liquidity at a scale of more than 10 billion.