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

 

24,087

 

25,057

 

26,646

Redeemable non-controlling interests

 

2,836

 

2,836

 

-

TOTAL LIABILITIES

 

2,047,604

 

1,944,178

 

1,429,465

             

Shareholders' equity

           

Common shares

 

16

 

16

 

16

Treasury shares

 

(16,773)

 

(14,507)

 

(3,085)

Additional paid-in capital

 

529,942

 

540,048

 

534,937

Statutory reserves

 

68,547

 

68,547

 

68,547

Retained earnings

 

257,435

 

253,365

 

244,310

Accumulated other comprehensive income

 

98,333

 

97,882

 

107,911

TOTAL EQUITY

 

937,500

 

945,351

 

952,636

             

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

2,985,104

 

2,889,529

 

2,382,101

                 

SOURCE Xinyuan Real Estate Co., Ltd.

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