INVESTOR CALL: Yuzhou Management Says Cash Flow, Balance Sheet Remains Strong Despite Profit Warning; Accuses Short Sellers of Spreading False Rumours

Management of Chinese property developer Yuzhou Group assured investors on a conference call held this afternoon, March 26, which Reorg attended, that the company maintains a strong cash flow and balance sheet despite forecasting a 94% year-over-year decline in net profit for 2020. The company will consider buying back its offshore notes to help stabilise bond prices once it publishes 2020 annual results next week, management said during the call.

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The call was hosted by chairman Lam Lung On and chief financial officer Chiu Yu Kang and arranged by JP Morgan Securities after prices of its offshore notes collapsed across the curve this morning, as reported.

Management said on the call that short sellers had spread false information about the company but the company is unable to comment due to compliance reasons until the annual results are officially released on March 30.

Management reiterated during the call that the expected decline in profit was due to delay in the development and delivery of property projects, as well as low selling prices last year amid the Covid-19 pandemic.

The company had a total cash of over RMB 34 billion ($5.2 billion) as of Dec. 31, 2020 while net gearing ratio is still in line with the government’s three red lines requirement. Dividend payout is expected to be no less than the level for 2019, the chairman said, adding that he, as largest shareholder, will continue to receive dividend payments in the form of new shares.

Yuzhou management did not take any questions from investors during the call.

Yuzhou disclosed in an announcement last night that, based on unaudited accounts, bank and other borrowings, corporate bonds and senior notes totalled RMB 63.9 billion as of Dec. 31, 2020, up from RMB 55.669 billion a year earlier.

Cash and cash equivalents, restricted cash and non-pledged time deposits with original maturity of over three months totalled RMB 34.469 billion, down from RMB 35.5 billion 12 months ago, while total equity increased from RMB 28.728 billion as of Dec. 31, 2019 to RMB 34.303 billion.

Net gearing ratio increased to 85.8% as of end-2020 from 70.17% a year earlier, the company said.

Below is Yuzhou’s capital structure: