A growing number of Chinese construction and decoration companies are writing off assets or issuing profit warnings as debt woes at China Evergrande Group and other property developers debilitate their suppliers.
More such disclosures are expected during the upcoming earnings season, putting pressure on Chinese authorities to do more to limit the contagion from the developers’ financial crisis and avert job losses.
Guangzhou Holike Creative Home Co, a furniture maker, became the latest company to disclose losses linked to Evergrande, which has racked up over $300 billion in debt, including 200 billion yuan ($31.44 billion) owed to suppliers via commercial paper.
Holike said in an exchange filing on Wednesday it expects 2021 net profit to slump as much as 60% from a year earlier, hurt by receivables to Evergrande that are unlikely to be collected.
In addition, China’s property market downturn has dented the value of a company it acquired in 2020, resulting in impairment losses, Holike said, adding that it has slashed business with Evergrande and is seeking claims.
Beijing Jiayu Door, Window and Curtain Wall Co also flagged risks this week, saying it turned in a loss of up to 1.4 billion yuan last year, thanks to receivables from Evergrande that are likely to go sour.
Earlier this month, Guangdong Pak Corp, a maker of lighting fixtures, said it forecast a 85%-90% drop in 2021 earnings, thanks to a jump in Evergrande-related impairment losses.
Shenzhen Wenke Landscape Co said it also fell into the red last year due to Evergrande defaults.
Most China-listed companies will start reporting annual results next month, with more such disclosures expected, as dozens of Chinese suppliers have disclosed debts owed by developers like Evergrande. Some have already set aside provisions.
- Reuters, with additional editing by George Russell
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