(Adds company comment, other details)
By Clare Jim
HONG KONG Aug 26 Evergrande Real Estate Group
reported on Tuesday a surge in its debt ratio in the
first-half as China's third largest property developer sought
funding for its expansion into top-tier cities, which offer
Evergrande's net gearing ratio climbed to 89.6 percent
during the first six months of the year, an increase of 20.1
percentage points from the end of 2013, the company said in its
Perpetual securities, or structured loans which are not
classified as debt in the balance sheet, also jumped 82 percent
from the previous six months to 44.5 billion yuan ($7.23
billion). These securities carry interest rates of 9 to 11
percent, according to the company.
Evergrande Chief Executive Officer Xia Haijun said the high
debt ratio was a result of the company's short-term strategy to
ensure it has enough capital to acquire more lucrative land in
first and second tier cities.
As a result, the company expects contracted sales this year
to "far exceed" the annual target of 110 billion yuan ($17.9
billion) and also remain strong into next year.
"We have 64 billion yuan cash now. This is based on the
worst case scenario that even if we couldn't borrow a penny from
the banks, we would still have a stable growth," he told
Evergrande said its core profit rose 39.3 percent in the
first half to 6.5 billion yuan while net profit climbed 13.6
percent to 7.1 billion yuan.
Chinese property developers are scrambling to raise funds to
expand amid tightening credit conditions, excess supply and a
slowdown in the nation's real estate industry.
Developers and investors are also trying to gauge the impact
of easing home purchase restrictions in some Chinese cities as
data shows price declines spreading to top-tier cities,
underscoring a worsening downturn that is dragging on the
In a bid to diversify its holdings, the Guangzhou-based
Evergrande said it was planning to get into businesses such as
agriculture, livestock, cooking oil and milk powder. It did not
give further details.
Shares of Evergrande closed up 4 percent after the
announcement, compared to a 0.37 percent fall in the broader
($1 = 6.1522 Chinese yuan)
(Reporting by Clare Jim; Editing by Miral Fahmy)