Heavily indebted Country Garden recently released its performance for last year, not only turning losses into profits but also earning over 3.26 billion yuan.
<h4>Key Points:</h4>
• Profits entirely stem from non-cash gains recorded from debt restructuring.
• Property sales recorded a gross loss of 43.1 billion yuan.
Liu Zhiheng
The real estate developer Country Garden Holdings Company Limited (2007.HK), on the brink of bankruptcy, recently announced its performance for the fiscal year 2025, surprisingly reporting a profit of 3.26 billion yuan, a significant leap compared to a loss of 32.8 billion yuan in 2024.
On the surface, the company's performance seems to have regained growth, but in reality, it is entirely due to non-cash gains from debt restructuring, amounting to 82.1 billion yuan. It can be said that the performance achieved through restructuring is purely accounting profit and not derived from improvements in core business. The actual situation is that real estate sales remain very weak, with last year's sales revenue at 154.89 billion yuan, a year-on-year decline of 38.7%, due to impairment provisions of 44.5 billion yuan for properties under construction and completed properties held for sale, resulting in a gross loss of 43.1 billion yuan.
The independent auditor Zhonghui Andah issued an &#34;unable to express an opinion&#34; statement, mainly because out of 148 billion yuan in borrowings, 107.6 billion yuan are current liabilities, while the group's cash and cash equivalents amount to only 18.7 billion yuan.
<h4>Re-inclusion in International Indices</h4>
From last year's performance, the company still seems to be shrouded in gloom, but the 17.7 billion USD in offshore debt and 9 domestic debts totaling 13.77 billion yuan have had their restructuring plans fully approved by the end of last year, temporarily alleviating the threats of creditors and bankruptcy liquidation orders. Country Garden's borrowings have also decreased from 253.5 billion yuan to 147.96 billion yuan by the end of last year.
After most debt restructuring plans were approved, the market began to pay more attention to Country Garden. In February, MSCI re-included Country Garden in the MSCI China Small Cap Index, making it the only real estate stock among the 21 newly included companies. In March, it was also included in the FTSE Russell Global Stock Index, again as the only domestic property developer.
With its inclusion in international indices, many global funds will allocate Country Garden stocks according to their weightings, which not only benefits the liquidity of the company's shares but also helps boost stock price performance. Notably, Country Garden's restructuring plan includes convertible bonds, with shares playing an important role in debt repayment, and becoming a component of international indices indeed gives the market greater confidence.
<h4>Rehiring Former Employees</h4>
In terms of business, last month the market suddenly reported that Country Garden was reaching out to former employees who had been laid off in recent years, inviting them back to work. Although the company stated that rehiring is only a channel to supplement a few key positions and is targeted at a small number of specific job needs, the ability to hire again is, after all, good news. On one hand, it likely indicates that stalled projects are being restarted and urgently need manpower, and revitalizing these projects will benefit the company's cash flow.
Secondly, the increase in hiring in the market represents that the company has resources available for mobilization; otherwise, letting employees naturally leave would suffice. Moreover, if the company were on the brink of collapse, there would be no need to spend money on hiring. This reflects that Country Garden's financial mobilization is not as tight as before, and the crisis is not as severe as in the previous two years
In addition, the policy level is favorable for the real estate market. The government work report during this year's Two Sessions has set the tone to &#34;focus on stabilizing the real estate market,&#34; clearly stating that policies should be implemented according to local conditions. In fact, the central government has been continuously introducing measures to stabilize the property market since last year, with multiple regions easing regulations. At the same time, the &#34;project whitelist&#34; mechanism has been strengthened. Once a developer's project is included in the whitelist, it means easier access to bank loans and corresponding financing.
Loans for whitelist projects from banks can not only be extended but also postponed for repayment, and they may not be classified as non-performing assets in the short term, significantly reducing the debt repayment pressure on developers. After completing deliveries, real estate companies can recover funds, alleviating liquidity pressure. Meanwhile, the whitelist can boost market confidence in real estate companies, making buyers more willing to purchase; creditors of the companies, seeing government support, are also more willing to engage in debt restructuring with the company.
<h4>Phoenix Awaits Rebirth from the Ashes</h4>
Country Garden's property sales are indeed far from their peak, but looking deeper, the company's sales have begun to stabilize, maintaining a sales amount of 2.2 to 2.7 billion yuan over the past four months.
Despite market criticism, today's sales of Country Garden, compared to the peak of 46.65 billion yuan in February 2021, are less than one-tenth; however, amidst the ongoing downturn in the real estate market, Country Garden's ability to maintain sales figures shows that the company's business has begun to bottom out and has not further deteriorated.
Undeniably, the direction of domestic property stocks largely depends on the future trends of the real estate market. Currently, the government is actively promoting policies to stabilize the property market, and debt restructuring for real estate companies is gradually being achieved. Although sales have not rebounded, there are already signs of bottoming out. Even though the recovery of the property market seems to require time, after debt restructuring, Country Garden has significantly reduced its debt, lowered interest burdens, and extended debt terms, giving the company time to restructure its business. As the property market gradually warms up, Country Garden may, like its company logo, rise from the ashes like a phoenix

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Country Garden Holdings Company Limited recently released its 2025 performance, turning a loss into a profit of 3.26 billion yuan, mainly due to non-cash gains from debt restructuring. Despite the apparent recovery in performance, actual sales revenue fell by 38.7% year-on-year, with a gross loss of 43.1 billion yuan. The company's debt restructuring plan has been approved, reducing borrowings from 253.5 billion yuan to 147.96 billion yuan. Country Garden has been re-included in international indices, attracting market attention and enhancing stock price liquidity

- Country Garden Holdings recently announced significant earnings of 3.26 billion yuan for 2025, rebounding from a loss of 32.8 billion yuan in 2024, primarily due to non-cash gains from debt restructuring totaling 82.1 billion yuan.  
- Despite these gains, property sales experienced a substantial loss of 43.1 billion yuan, with revenues down 38.7% at 154.89 billion yuan, highlighting ongoing weaknesses in the real estate sector.  
- Government policies aimed at stabilizing the market and successful debt restructuring are expected to alleviate pressure on the company, potentially allowing it to stabilize and grow in the future.

Walking through the valley of the shadow of death, COUNTRY GARDEN begins to see the light