New World Development Co.’s woes persist as the company recorded a loss of HK$6.6 billion ($1.14 billion) for the first half after writing down the value of properties amid a prolonged real estate slump in Hong Kong.
The developer controlled by the billionaire Cheng family posted the loss in the six months ended Dec. 31 due to writedowns on its residential projects and commercial properties, according to a filing to the Hong Kong stock exchange Friday. That compares with profit of HK$502 million a year earlier.
New World is trying to navigate falling home prices and weak commercial rents just when it needs cash the most. The city’s most indebted major developer is under pressure to sell homes cheaply at a time of oversupply and persistently high interest rates. It priced its latest residential project State Pavilia 10% lower than other new projects in the North Point area to accelerate sales.
The property market in Hong Kong remains challenging and the company’s debt load is still high, Chief Executive Officer Echo Huang said at a news briefing. New World will prioritize lowering its debt levels, while seeking to offload HK$26 billion of assets including residential projects and commercial properties in the current financial year, she added.
New World could continue to suffer from a rising leverage ratio due to falling asset prices, Bloomberg Intelligence analysts including Patrick Wong wrote after the results. The company’s net debt rose to 95.5% of shareholders’ equity as of December from 91.7% six months earlier, they wrote in a note.
Consolidated net debt inched up to HK$124.6 billion, according to the company’s filing. Revenue fell 1.6% to HK$16.8 billion. Core operating profit slid 18% to HK$4.4 billion.
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Home values have fallen 27% across Hong Kong since their peak in 2021 and are near the lowest levels since 2016 in recent months.
Record-high office vacancies and tepid retail sales also limit rental income for landlords like New World. The office vacancy rate in the city stood at 16.8% at the end of last year, the highest since records began in 2006, data from Colliers International show.
Considered one of the Big Four developers in Hong Kong, New World has faced a slew of challenges in the past year from debt pressure to frequent management changes. It is racing to offload assets and mortgage some of its marquee properties to raise cash to alleviate its heavy debt load.
