2024 will still be an arduous year for the construction of Central South China to cope with the challenges of survival.
China Housing Daily reporter Fu Shanshan reported from Shanghai
Delisted, led by the war, and inquired by the exchange, Jiangsu Zhongnan Construction Group Co., Ltd. (hereinafter referred to as "Zhongnan Construction", 000961. SZ) is at stake.
After a short trading halt, on April 24, Zhongnan Construction resumed trading, but the stock abbreviation was changed from "Zhongnan Construction" to "ST Zhongnan", and the stock code remained unchanged.
Just the day before, Zhongnan Construction held an online performance briefing for 2023 as usual, and Chen Jinshi, chairman of Zhongnan Construction, Chen Yuhan, general manager, and Liang Jie, secretary of the board of directors, attended the results conference. This may be the shortest performance briefing in the history of Zhongnan Construction, and in more than 30 minutes, the management responded to the company's performance and recent risk events.
Perhaps because of poor performance, or because the company is facing multiple risks, the management of Zhongnan Construction looks a little sad. However, the management represented by Chen Yuhan reiterated that they would work hard to overcome difficulties, deliver the house according to plan and quality, and "never lie down and retreat".
Net profit has been negative for three consecutive years
The delisting alarm sounded
The "hat" of real estate stocks is not new in the industry. In May 2023, 8 real estate stocks were put on risk alert for different reasons, among which the stock abbreviation of real estate companies that were subject to "other risk alerts" will be marked with "ST".
On the evening of April 22, Zhongnan Construction announced that the company's shares were suspended for one day from the opening of the market on April 23 and resumed trading from the opening of the market on April 24, and the company's shares were implemented "other risk warnings" since April 24.
The reason for the implementation of other risk warnings is that the company's audited net profit attributable to shareholders of listed companies in 2021, 2022 and 2023 will be -3.382 billion yuan, -9.183 billion yuan and -5.293 billion yuan respectively, and the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses will be -4.036 billion yuan, -9.656 billion yuan and -4.627 billion yuan respectively, and the net profit before and after deducting non-recurring gains and losses in the last three consecutive fiscal years will be negative.
At the same time, the annual audit accounting firm of Zhongnan Construction, Causeton Certified Public Accountants (Special General Partnership), issued an unqualified audit opinion with significant uncertainties related to continuing operations on the company's 2023 annual financial report.
According to the regulations of the Shenzhen Stock Exchange, if the net profit of a listed company before and after deducting non-recurring gains and losses in the last three fiscal years is negative, and the audit report of the most recent year shows that there is uncertainty about the company's ability to continue operations, then the company's shares will be subject to other risk warnings.
At the results meeting, the management of Zhongnan Construction responded to this question and said that if the company returns to profitability, or the company's future annual financial report no longer contains uncertainty about its ability to continue operations, then other risk warnings can be eliminated.
In response to the ability to continue operations mentioned therein, Zhongnan Construction also issued a special description.
Liang Jie said that although the market continues to adjust, most of the company's interest-bearing liabilities can be deferred in the context of the further implementation of the national financial policy to support the steady and healthy development of real estate. In 2023, the company's interest-bearing liabilities will actually decrease by 4.3 billion yuan, and from a cash flow perspective, debt expenses will be 3.1 billion yuan, and it is expected that the expenditure in this area will be even less in 2024. In addition, due to the significant decline in the scale of completion and delivery of the company this year, the operating expenses will also be reduced, and after carefully evaluating the liquidity, financial condition, operating conditions and possible sources of financing in the coming year, the management believes that the company does not have the risk of substantial ability to continue operations in the coming year or beyond.
In addition to "wearing a hat", the share price of Zhongnan Construction has been below 1 yuan for 12 consecutive trading days as of April 22, and the alarm of "delisting at face value" has been sounded, and "shell" is very important.
In this regard, Zhongnan Construction believes that it is the company's intrinsic value and performance that determines the company's stock price, and believes that with the company's efforts to reduce losses year-on-year and improve its operation in the future, the market will give a more objective stock price judgment.
Management also reiterated its plan to boost the company's stock price through an executive shareholding increase plan at the earnings meeting. Previously, in the record of investor activities released on April 17, Zhongnan Construction disclosed that the company launched a plan to increase the holdings of directors and senior managers, and Shi Jinhua and other 6 directors and senior managers of the company plan to increase their holdings of the company's shares through the secondary market within 6 months, with a total amount of not less than 5 million yuan and no more than 10 million yuan.
Continue to tackle the challenges of survival
Management reiterates that "we will never lie down and back down"
2024 will still be an arduous year for the construction of Central South China to cope with the challenges of survival.
Chen Yuhan has also expressed Zhongnan Construction's determination not to lie flat many times at past performance meetings. This time, she once again reiterated that the company will overcome all kinds of difficulties, never lie down and retreat, and deliver the house according to plan and quality in a down-to-earth manner.
"As a large-scale private enterprise with a history of more than 30 years, Zhongnan Construction has also experienced various ups and downs and setbacks, whether it is the spirit of Nantong's construction iron army, Zhongnan's own tenacious entrepreneurial spirit, or our social responsibility and economic responsibility, will become a powerful force to help us tide over difficulties. Chen Yuhan said.
According to him, in 2024, one of the company's major tasks is to reduce losses.
According to the data, due to the impact of the downward cycle of the industry, the two main businesses of real estate development business and construction business, the cumulative net loss of Zhongnan Construction from 2021 to 2023 has reached 18.319 billion yuan. Among them, the loss of the construction business exceeded expectations.
"First of all, the layout and composition of the business will be structurally optimized. Resolutely withdraw from loss-making areas and loss-making businesses, especially for the construction business, resolutely control risks and avoid new business losses. Do everything you can to clear your debts and get out of the losing project. Chen Yuhan said that it is necessary to implement the overall direction of impairment and cost reduction, continue to optimize and adjust at the organizational level, significantly reduce management costs, avoid the situation of "small horses and big carts", and strive to increase loss reduction efforts in 2024. In addition, we will continue to promote the extension of debt and financing to ease the pressure on redemption. We will try our best to obtain possible policy financing support to alleviate the pressure on cash flow, and at the same time, we will also strive to ensure that the net operating cash flow is positive, and we will operate prudently.
In the current crisis, the local government has also provided assistance to Zhongnan Construction, including coordinating communication between Zhongnan Construction and financial institutions, promoting local state-owned construction enterprises to carry out construction business cooperation with Zhongnan Construction, and supporting social capital to set up investment funds through market-oriented mechanisms, introducing strategic investors, and increasing its shareholding in Zhongnan Construction.
Recently, it has been reported that Zhongnan Urban Construction Investment Co., Ltd., the controlling shareholder of Zhongnan Construction, led by the Haimen District Government of Nantong City, is negotiating cooperation with Asian private equity investment companies PAG and Jiangsu Asset Management and other institutions in debt resolution and equity transactions.
This matter has also attracted the attention of the Shenzhen Stock Exchange, and a regulatory letter has been issued, requiring Zhongnan Construction to explain the specific content, timing and progress of relevant cooperation.
However, the management of Zhongnan Construction said at the performance meeting: "There is no further information at present. The company's management said that on April 20, under the auspices of relevant government departments, the company's controlling shareholder did negotiate with the relevant institutions on cooperation matters, and if the cooperation involves information disclosure related to the company, the company will urge the controlling shareholder to fulfill the information disclosure obligation in a timely manner.