Xinyuan Real Estate : Announces Third Quarter 2014 Financial Results
November 11, 2014 at 06:04 am EST
Share
Xinyuan Real Estate Co., Ltd. Announces Third Quarter 2014 Financial Results
BEIJING, Nov. 11, 2014 /PRNewswire/ -- Xinyuan Real Estate Co., Ltd. ("Xinyuan" or "the Company") (NYSE: XIN), a residential real estate developer with a primary focus on high growth cities in China, today announced its unaudited financial results for the third quarter 2014.
Highlights for the Third Quarter 2014
Net income was US$7.8 million, a 14.7% increase from US$6.8 million in the second quarter of 2014 and a 72.8% decrease from US$28.7 million reported in the third quarter of 2013.
Total third quarter revenues were US$163.6 million, a 1.9% decrease from US$166.8 million recorded in the second quarter of 2014 and a 32.0% decrease from US$240.7 million reported in the third quarter of 2013. Contract sales totaled US$167.7 million, a 15.6% decrease from US$198.7 million recorded in the second quarter of 2014 and a 31.2% decrease from US$243.7 million recorded in the third quarter of 2013.
Total gross floor area ("GFA") sales were 100,300 square meters, a 33.0% decrease from 149,600 square meters sold in the second quarter of 2014, and a 34.0% decrease from 151,900 square meters sold in the third quarter of 2013.
Selling, General, and Administrative ("SG&A") expenses as a percent of total revenue totaled 19.6% compared to 21.4% in the second quarter of 2014 and 9.6% in the third quarter of 2013.
Diluted net earnings per American Depositary Share ("ADS") attributable to shareholders were US$0.10, compared to diluted net earnings per ADS of US$0.08 in the second quarter of 2014 and US$0.39 per ADS in the third quarter of 2013.
The Company repurchased 0.63 million ADSs at a total cost of approximately US$2.3 million in the third quarter of 2014.
Mr. Yong Zhang, Xinyuan's Chairman said, "China's real estate market remained challenging across the industry in the third quarter as there remained less home purchase activity by consumers. This resulted in lower revenue and contract sales than we anticipated last quarter, however, we managed to meet our net income guidance and achieve sequential profit growth as operating expenses were lower. We had 14 projects that were active and available for sale and we acquired one land parcel in Xi'an City, Shaanxi Province in the third quarter.
"At the end of the third quarter, the government initiated some important policies to improve China's housing market, which included allowing a broader range of home buyers access to lower down payments and easing mortgage credit. We believe such initiatives can help stabilize the real estate market and create more home purchasing activity over time. As we enter the fourth quarter, we will maintain strict cost controls and be highly selective with our land bank expansion activity. We have five new projects scheduled to launch in the fourth quarter and believe we are well positioned to enhance our performance as market conditions improve," concluded Mr. Zhang.
Financial Results for the Third Quarter 2014
Contract Sales
Contract sales totaled US$167.7 million in the third quarter compared to US$198.7 million in the second quarter of 2014 and US$243.7 million in the third quarter of 2013. The Company's GFA sales were 100,300 square meters in the third quarter of 2014 versus 149,600 square meters in the second quarter of 2014 and 151,900 square meters in the third quarter of 2013. The average selling price ("ASP") per square meter sold was RMB10,272(US$1,672) in the third quarter of 2014 versus RMB8,155(US$1,329) in the second quarter of 2014 and RMB9,976(US$1,604) in the third quarter of 2013.
Breakdown of GFA Sales and ASP's by Project
Q3 2013
Q2 2014
Q3 2014
Unsold
GFA
ASP
GFA
ASP
GFA
ASP
GFA
Project
(m2 000)
(Rmb)
(m2 000)
(Rmb)
(m2 000)
(Rmb)
(m2 000)
Zhengzhou Royal Palace
12.9
10,767
-
-
-
-
0.5
Zhengzhou Century East A
13.7
10,708
0.4
17,792
-
-
1.0
Zhengzhou Century East B
7.9
14,058
0.1
9,200
-
-
0.6
Zhengzhou Xin City
31.6
9,587
35.0
6,086
8.4
11,484
44.0
Zhengzhou Thriving Family
-
-
33.0
7,196
27.6
7,240
81.9
Xingyang Splendid I
-
-
24.5
5,250
6.5
5,366
86.8
Kunshan Royal Palace
-
-
6.3
10,081
6.6
8,875
222.0
Suzhou Xin City
29.3
8,160
10.8
10,040
5.5
10,659
9.6
Suzhou Lake Royal Palace
-
-
-
-
2.0
11,095
167.2
Jinan Xinyuan Splendid
48.5
10,021
25.8
8,895
20.1
9,881
54.1
Jinan Royal Palace
-
-
3.5
6,856
18.1
6,428
426.0
Xuzhou Colorful City
-
-
2.7
15,546
-0.3
8,863
91.3
Beijing Xindo Park
-
-
6.1
24,431
5.3
27,233
84.9
Chengdu Thriving Family
-
-
-
-
0.4
5,296
214.4
Others
8.0
1.4
0.1
4.5
Total
151.9
9,976
149.6
8,155
100.3
10,272
1,488.8
Revenue
In the third quarter of 2014, the Company's total revenue was US$163.6 million compared to US$166.8 million in the second quarter of 2014 and US$240.7 million in the third quarter of 2013.
Gross Profit
Gross profit for the third quarter of 2014 was US$43.5 million, or 26.6% of revenue, compared to a gross profit of US$43.3 million, or 25.9% of revenue, in the second quarter of 2014 and a gross profit of US$78.5 million, or 32.6% of revenue, in the third quarter of 2013. The increase in gross margin compared to the second quarter of 2014 was mainly due to car park sales in two Zhengzhou projects this quarter.
Selling, General and Administrative Expenses
SG&A expenses were US$32.1 million for the third quarter of 2014 compared to US$35.6 million for the second quarter of 2014 and US$23.0 million for the third quarter of 2013. As a percentage of total revenue, SG&A expenses were 19.6% compared to 21.4% in the second quarter of 2014 and 9.6% in the third quarter of 2013.
Taxation
In the third quarter of 2014, the Company reduced its unrecognized tax benefit liability related to the Zhengzhou Modern City project by US$8.7 million due to the expiration of a three-year statute of limitations period. Based on the levy method applied by the Zhengzhou local tax bureau before 2011, the Company's Zhengzhou Modern City project located in Zhengzhou, was paying corporate income tax on a deemed profit method. Under the deemed profit method, taxable income is deemed to be 15% of cash receipts, regardless of actual income generated in 2010. The Company believed that it was more likely than not that the PRC national tax authorities would require Zhengzhou Modern City project to pay corporate income taxes based on the statutory taxable income method instead of the deemed profit method. Based on the above, the Company recorded the difference between the corporate income taxes due based on the statutory taxable income method and the corporate income taxes based on the deemed profit method amounting to US$8.7 million as tax liability since 2010. The three-year statute of limitation according to the PRC Tax administration and Tax Collection Law has already expired in 2014. Accordingly, the Company reduced its unrecognized tax benefit liability related to the Zhengzhou Modern City project by US$8.7 million.
Net Income
Net income for the third quarter of 2014 was US$7.8 million, compared to US$6.8 million for the second quarter of 2014 and US$28.7 million for the third quarter of 2013. Net margin was 4.8%, compared to 4.1% in the second quarter of 2014 and 11.9% in the third quarter of 2013. Diluted earnings per ADS were US$0.10, compared to US$0.08 per ADS in the second quarter of 2014 and to US$0.39 per ADS in the third quarter of 2013.
Balance Sheet
As of September 30, 2014, the Company reported US$553.0 million in cash and cash equivalents (including restricted cash), compared to US$680.2 million as of June 30, 2014. Total debt outstanding was US$1,391.5 million, an increase of US$80.7 million, compared to US$1,310.8 million at the end of the second quarter of 2014. The balance of the Company's real estate property under development at the end of the third quarter was US$1,599.1 million, compared to US$1,540.8 million at the end of the second quarter of 2014.
Project Status
Below is a summary table of projects that were active and available for sale in the third quarter of 2014.
GFA
Contract Sales
Project Cost % Complete
(m2 000)
(US$ millions)
Project
Total Active Projects
Sold to date
Total Active Projects
Sales to date
% Sold
Zhengzhou Royal Palace
132.4
131.9
248.9
246.1
98.9%
94.6%
Zhengzhou Century East A
77.3
76.3
129.1
127.4
98.7%
98.5%
Zhengzhou Century East B
166.5
165.9
253.0
252.1
99.6%
98.3%
Zhengzhou Xin City
206.4
162.4
341.1
245.3
71.9%
73.6%
Zhengzhou Thriving Family
142.5
60.6
150.2
71.1
47.3%
47.4%
Xingyang Splendid I
117.8
31.0
93.9
26.6
28.3%
44.2%
Kunshan Royal Palace
284.3
62.3
495.9
96.0
19.4%
48.6%
Suzhou Xin City
127.3
117.7
186.7
169.2
90.6%
80.7%
Suzhou Lake Royal Palace
169.2
2.0
365.5
3.6
1.0%
72.5%
Jinan Xinyuan Splendid
574.9
520.8
811.4
736.1
90.7%
88.8%
Jinan Royal Palace
447.6
21.6
694.6
22.8
3.3%
45.2%
Xuzhou Colorful City
129.0
37.7
210.8
56.0
26.6%
50.4%
Beijing Xindo Park
132.1
47.2
478.9
169.3
35.4%
74.4%
Chengdu Thriving Family
214.8
0.4
359.9
0.3
0.1%
58.6%
Others remaining GFA
4.5
Total active projects
2,926.6
1,437.8
4,820.1
2,222.2
46.1%
68.7%
As of September 30, 2014, the Company's total sellable GFA was approximately 2,534,100 square meters for active projects and under planning stage projects in China, up 2.7% from 2,467,300 square meters as of the Company's last reporting earnings date. Below is a summary of all of the Company's planning stage projects:
Unsold GFA
Pre sales Scheduled
(m2 000)
Xingyang Splendid II&III
177.4
Q4 2014
Zhengzhou Xindo Park (commercial)
146.2
Q4 2014
Sanya Yazhou Bay No.1
117.8
Q4 2014
Shanghai Royal Palace
57.2
Q4 2014
Changsha Xinyuan Splendid
252.6
Q4 2014
Newly Acquired Shaanxi Land
294.1
Q2 2015
Total projects under planning
1,045.3
Total active projects
1,488.8
Total all Xinyuan projects in China
2,534.1
The Company's New York Oosten project has a total GFA of 37,078 square meters. Presales of the project are on track. As of October 31, 2014, approximately 20% of all units were under contracts. The revenue is expected to be recognized in 2016 after delivery.
Redemption of TPG Convertible Note
Subsequent to the end of the third quarter, the Company entered into a redemption agreement with TPG Asia VI SF Pte. Ltd. ("the Holder"), pursuant to which the Company has agreed to redeem in full on December 1, 2014 its 5% senior secured convertible notes due 2018 in an aggregate principal amount of US$75,761,009 issued on September 19, 2013 to the Holder. The Company will pay in cash as a redemption price an amount equal to (i) the principal of the Note, plus (ii) all accrued and unpaid interest up to and including the redemption date, plus (iii) an amount equal to the principal multiplied by 13%. The company has available cash to fund the redemption, however it is also considering other alternatives to finance the redemption.
Conference Call Information
The Company will hold a conference call at 7:30 am ET on November 11, 2014 to discuss third quarter 2014 results. Listeners may access the call by dialing 1-913-312-0391. A webcast will also be available through the Company's investor relations website at http://www.xyre.com. A replay of the call will be available through November 18, 2014 by dialing 1-858-384-5517, access code: 2669871.
About Xinyuan Real Estate Co., Ltd.
Xinyuan Real Estate Co., Ltd. ("Xinyuan") (NYSE: XIN) is a developer of large scale, high quality residential real estate projects aimed at providing middle-income consumers with a comfortable and convenient community lifestyle. In China, Xinyuan primarily focuses its development projects in high growth cities, including Zhengzhou, Jinan, Suzhou, Kunshan, Xuzhou, Chengdu, Shanghai, Beijing, Changsha, Sanya, Xi'an and Hefei. The Company's U.S. development arm, XIN Development Group International, Inc., is a pioneer amongst Chinese real estate residential developers, entering the US market in 2012. Xinyuan is the first real estate developer from China to be listed on the New York Stock Exchange. For more information, please visit http://www.xyre.com.
Forward Looking Statements
Certain statements in this press release constitute "forward-looking statements". These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements includes statements about estimated financial performance, sales performance and activity, among others and can generally be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Statements that are not historical statements are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including, but not limited to, our ability to continue to implement our business model successfully; our ability to secure adequate financing for our project development; our ability to successfully sell or complete our property projects under construction and planning; our ability to enter into new geographic markets and expand our operations; the marketing and sales ability of our third-party sales agents; the performance of our third-party contractors; the impact of laws, regulations and policies relating to real estate developers and the real estate industry in the countries in which we operate; our ability to obtain permits and licenses to carry on our business in compliance with applicable laws and regulations; competition from other real estate developers; the growth of the real estate industry in the markets in which we operate; fluctuations in general economic and business conditions in the markets in which we operate; and other risks outlined in our public filings with the Securities and Exchange Commission, including our annual report on Form 20-F for the year ended December 31, 2013. Except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statement is made.
Notes to Unaudited Financial Information
This release contains unaudited financial information which is subject to year-end audit adjustments. Adjustments to the financial statements may be identified when the audit work is completed, which could result in significant differences between our audited financial statements and this unaudited financial information.
For more information, please contact:
In China:
Xinyuan Real Estate Co., Ltd.
Ms. Jing Ye
Investor Relations Director
Tel: +86 (10) 8588-9376
Email: irmanager@xyre.com
ICR, LLC
In U.S.: +1-646-308-1472
In China: +86 (10) 6583-7511
Email: William.zima@icrinc.com
XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All US$ amounts and number of shares data in thousands, except per share data)
Three months ended
September 30,
June 30,
September 30,
2014
2014
2013
(unaudited)
(unaudited)
(unaudited)
Total revenue
163,612
166,824
240,665
Total costs of revenue
(120,154)
(123,565)
(162,152)
Gross profit
43,458
43,259
78,513
Selling and distribution expenses
(8,495)
(8,857)
(5,633)
General and administrative expenses
(23,642)
(26,761)
(17,397)
Operating income
11,321
7,641
55,483
Interest income
2,979
1,440
4,085
Interest expense
(5,904)
(7,467)
(5,608)
Income from changes in fair value of short-term investment
2,105
(85)
-
Other income
-
3,109
-
Exchange gains
-
50
-
Share of loss of an equity investee
(227)
(201)
-
Income from operations before income taxes
10,274
4,487
53,960
Income taxes
(2,501)
2,345
(25,212)
Net income
7,773
6,832
28,748
Net income attributable to Xinyuan Real Estate Co., Ltd. shareholders
7,773
6,832
28,748
Earnings per ADS:
Basic
0.10
0.09
0.40
Diluted
0.10
0.08
0.39
ADS used in computation:
Basic
75,325
76,343
71,360
Diluted
88,165
89,272
73,480
XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All US$ amounts and number of shares data in thousands, except per share data)
Nine months ended
September 30,
September 30,
2014
2013
(unaudited)
(unaudited)
Revenue
556,848
608,578
Cost of revenue
(410,762)
(404,512)
Gross profit
146,086
204,066
Selling and distribution expenses
(22,133)
(11,281)
General and administrative expenses
(69,897)
(38,848)
Operating income
54,056
153,937
Interest income
5,865
8,596
Interest expense
(22,012)
(10,450)
Other income
3,109
-
Income from changes in fair value of short-term investment
2,105
-
Exchange gains
50
-
Share of loss of an equity investee
(645)
-
Income from operations before income taxes
42,528
152,083
Income taxes
(17,873)
(57,357)
Net income
24,655
94,726
Net income attributable to Xinyuan Real Estate Co., Ltd. shareholders
24,655
94,726
Earnings per ADS:
Basic
0.32
1.33
Diluted
0.30
1.31
ADS used in computation:
Basic
76,481
71,266
Diluted
89,440
72,344
XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All US$ amounts and number of shares data in thousands)
September 30,
June 30,
December 31,
2014
2014
2013
(unaudited)
(unaudited)
(audited)
ASSETS
Current assets
Cash and cash equivalents
319,443
374,120
587,119
Restricted cash
233,514
306,069
250,098
Short-term investment
5,029
3,348
-
Accounts receivable
23,436
31,244
8,528
Other receivables
108,860
85,914
10,593
Restricted deposit
11,410
11,409
11,514
Deposits for land use rights
359,437
220,737
297,389
Other deposits and prepayments
122,189
115,193
103,790
Advances to suppliers
18,889
25,367
15,317
Real estate property held for sale
1,694
2,970
5,524
Real estate property development completed
12,629
13,969
21,260
Real estate property under development
1,599,106
1,540,816
932,519
Amounts due from related parties
12,017
2,113
820
Amounts due from employees
1,228
713
59
Other current assets
159
193
-
Total current assets
2,829,040
2,734,175
2,244,530
Real estate properties held for lease, net
62,499
62,970
60,410
Property and equipment, net
46,697
46,089
46,706
Other long-term investment
242
242
242
Investment in joint venture
5,248
5,474
5,945
Deferred tax assets
14,796
14,528
10,191
Deferred charges
18,614
18,988
9,049
Other assets
7,968
7,063
5,028
TOTAL ASSETS
2,985,104
2,889,529
2,382,101
XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All US$ amounts and number of shares data in thousands)
September 30,
June 30,
December 31,
2014
2014
2013
(unaudited)
(unaudited)
(audited)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
254,731
250,675
194,403
Short-term bank loans and other debt
170,662
170,654
23,291
Customer deposits
106,803
93,927
75,285
Income tax payable
47,543
57,296
121,642
Deferred tax liabilities
103,428
105,402
78,958
Other payables and accrued liabilities
79,599
65,945
73,446
Payroll and welfare payable
7,342
3,980
19,638
Current portion of long-term bank loans and other debt
359,553
424,712
217,964
Current maturities of capital lease obligations
2,994
2,721
2,746
Total current liabilities
1,132,655
1,175,312
807,373
Non- current liabilities
Long-term bank loans
39,303
59,466
32,804
Other long term debt
821,982
655,957
536,943
Deferred tax liabilities
10,575
9,385
9,385
Unrecognized tax benefits
16,166
16,165
16,314
Capital lease obligations, net of current maturities
Xinyuan Real Estate Co., Ltd. (Xinyuan) is a holding company and conducts business primarily through its operating subsidiaries in China. The Company is a real estate developer and property manager that primarily focuses on residential properties. Xinyuan is engaged in developing large scale residential projects, which consist of multiple residential buildings that include multi-layer apartment buildings, sub-high-rise apartment buildings or high-rise apartment buildings. Its segments include property developments in Zhengzhou, Henan Province; property developments in Jinan, Shandong Province; property developments in Suzhou, Xuzhou and Kunshan, Jiangsu Province; property developments in Chengdu, Sichuan Province; property developments in Beijing; property developments in Sanya, Hainan Province; property developments in Changsha, Hunan Province; property developments in Shanghai; property developments in Tianjin; property developments in the United States, and other.