Press release from PR Newswire
Xinyuan Real Estate Co., Ltd. Announces First Quarter 2012 Financial Results
Wednesday, May 09, 2012
Xinyuan Real Estate Co., Ltd. Announces First Quarter 2012 Financial Results06:00 EDT Wednesday, May 09, 2012-- Company Exceeds First Quarter Revenue, Net Income, and EPS Projections --BEIJING, May 9, 2012 /PRNewswire-Asia/ -- Xinyuan Real Estate Co., Ltd. ("Xinyuan" or "the Company") (NYSE: XIN), a residential real estate developer with a focus on high growth, strategic Tier II cities in China, today announced its unaudited financial results for the first quarter of 2012.Highlights for the First Quarter 2012Total first quarter revenues were US$172.6 million, an 88.0% increase from US$91.8 million reported in the first quarter of 2011, and a 13.6% decrease from US$199.8 million recorded in the fourth quarter of 2011. Contract sales totaled US$159.7 million, a 63.0% increase from US$98.0 million recorded in the first quarter of 2011, and a 7.2% decrease from US$172.1 million recorded in the fourth quarter of 2011. Total gross floor area ("GFA") sales were 114,600 square meters, a 40.4% increase from 81,600 square meters sold in the first quarter of 2011 and a 2.4% increase from 111,900 square meters sold in the fourth quarter of 2011. Selling, General, and Administrative ("SG&A") expenses as a percent of total revenue totaled 6.9% compared to 8.1% in the first quarter of 2011 and 5.8% in the fourth quarter of 2011. Net income reached US$23.2million, a 98.3% increase from US$11.7 million reported in the first quarter of 2011 and an 18.0% decrease from US$28.3 million in the fourth quarter of 2011. Diluted net earnings per American Depositary Share ("ADS") attributable to shareholders were US$0.31, equivalent to US$0.15 per common share, compared to diluted net earnings per ADS of US$0.16, equivalent to US$0.08 per common share, in the first quarter of 2011 and US$0.38 per ADS, equivalent to US$0.19 per common share, in the fourth quarter of 2011. Cash and cash equivalents, including restricted cash, increased by US$28.1 million to US$515.7 million as of March 31, 2012 from US$487.6 million as of December 31, 2011. Short and long term debt decreased by US$2.8 million to US$282.7 million compared to US$285.5 million as of December 31, 2011. On April 18, 2012 the Company announced a quarterly dividend of US$0.04 per ADS (US$0.02 per share) to shareholders of record on April 30, 2012 payable on May 15, 2012.Mr. Yong Zhang, Xinyuan's Chairman and Chief Executive Officer said, "We were pleased to experience a strong contract sales growth in February and March versus a very weak January. As a result, we exceeded our contract sales, revenue and net income guidance ranges for the first quarter. Our contract sales results reflect the impact of selective discounting within certain development projects and indicate that our development projects in Tier II & III cities continue to be better insulated from restrictive government policies than projects in Tier I cities. Ten development projects were active in the first quarter with total GFA sales of nearly 115,000 square meters. "Looking ahead, and assuming there will be no easing of government-implemented buyer restriction policies, we expect contract sales to show moderate growth over prior 2012 financial projections with selective discounting continuing through the end of the year."We were also pleased to announce the implementation of a US$0.04 per ADS quarterly dividend. Our annual payout of US$0.16 per ADS is 60% higher than the prior year period. We continue to seek attractive land acquisitions at reasonable prices and to maximize shareholder returns through our quarterly dividend payments and share repurchase program. With a highly diversified project pipeline and strong balance sheet, we remain highly confident in our strategy to offer affordable developments in Tier II & III cities."Financial Results for the First Quarter 2012 Contract SalesContract sales totaled US$159.7 million in the first quarter compared to US$98.0 million in the first quarter of 2011 and US$172.1 million in the fourth quarter of 2011. The Company's GFA sales were 114,600 square meters in the first quarter of 2012 versus 81,600 square meters in the first quarter of 2011 and 111,900 square meters in the fourth quarter of 2011. The average selling price per square meter sold was RMB8,787 (US$1,393) in the first quarter of 2012 versus RMB7,908 (US$1,201) in the first quarter of 2011 and RMB9,940 (US$1,538) in the fourth quarter of 2011. The sequential ASP decline is attributed to sales of high-priced retail space in the previous quarter not continuing in the first quarter and to selectively discounting of certain residential properties as planned.Breakdown of GFA Sales and ASP's by Project Q1 2011Q4 2011Q1 2012UnsoldGFAASPGFAASPGFAASP GFAProject(sqm 000)(Rmb)(sqm 000)(Rmb)(sqm 000)(Rmb)(sqm 000)Chengdu Splendid I5.35,2666.310,1952.87,04815.9Chengdu Splendid II28.37,04513.96,93620.26,82931.5Zhengzhou Modern City11.98,21715.513,46211.39,64651.6Zhengzhou Royal Palace--9.215,5686.716,244104.2Zhengzhou Century East B--13.18,55511.28,215106.5Kunshan Intl City Garden4.011,3367.99,433(4.6)8,201120.6Suzhou Intl City Garden2.114,80010.110,67627.89,83640.8Xuzhou Colorful Garden21.37,3210.811,0640.87,5490.2Jinan Xinyuan Splendid--7.58,37516.47,723462.9Zhengzhou Yipinxiangshan II3.78,19226.88,15720.77,22858.6Others5.0-0.8-1.3-6.7 Total81.67,908111.99,940114.68,787999.5The negative GFA sales for the Company's Kunshan project in the table above reflects the Q1 2012 cancellation by mutual agreement of 137 apartment contracts totaling US$19 million dating back to 2010 when government policy restrictions rendered many buyers ineligible for mortgages. In 2010 the Company recognized total sales reversals of US$42.8 million from 348 apartments where the Company took the position that contracts not clearly executable under prevailing government policies should not be recognized as revenue under the percentage of completion method. Thus, these Q1 2012 Kunshan contract cancellations do not impact revenue under the percentage of completion method. As of the end of the first quarter of 2012, 190 unrecognized contracts with a total value of US$25.4 million remain outstanding.Revenue under the Percentage of Completion Method In the first quarter of 2012, the Company's total revenue using the percentage of completion method was US$172.6 million compared to US$91.8 million in the first quarter of 2011 and US$199.8 million in the fourth quarter of 2011.Gross ProfitGross profit for the first quarter of 2012 was US$49.2 million, or 28.5% of revenue, compared to gross profit of US$25.1 million, or 27.3% of revenue, in the first quarter of 2011 and a gross profit of US$56.4 million, or 28.2% of revenue, in the fourth quarter of 2011.Each quarter the Company revises total project cost and sales projections for all projects. In the first quarter of 2012 US$1.0 million of cumulative gross profit was recognized under the percentage of completion method due to changes in estimates compared to US$0.8 million being recognized the previous quarter due to changes in estimates.Selling, General and Administrative Expenses SG&A expenses were US$12.0 million for the first quarter of 2012 compared to US$7.4 million for the first quarter of 2011 and US$11.7 million for the fourth quarter of 2011. As a percentage of total revenue, SG&A expenses were 6.9% compared to 8.1% in the first quarter of 2011 and 5.8% in the fourth quarter of 2011. The sequential increase in SG&A expenses was partly due to increased legal and consulting expenses in the project search and evaluation process for residential projects in the United States.Share-based Compensation Share-based compensation was US$0.1 million for the first quarter of 2012 compared to US$0.5 million for the first quarter of 2011 and US$0.2 million for the fourth quarter of 2011. Net IncomeNet income for the first quarter of 2012 was US$23.2 million compared to US$11.7 million for the same period in 2011 and US$28.3 million in the fourth quarter of 2011. Net margin was 13.5 %, compared to 12.7% in the first quarter of 2011 and 14.2% in the fourth quarter of 2011. Diluted earnings per ADS were US$0.31, equivalent to US$0.15 per common share, compared to a profit of US$0.16 per ADS, equivalent to US$0.08 per common share for the same period in 2011, and US$0.38 per ADS, equivalent to US$0.19 per common share, in the fourth quarter of 2011.Balance SheetAs of March 31, 2012, the Company reported US$515.7 million in cash and cash equivalents (including restricted cash) compared to US$487.6 million as of December 31, 2011. Total debt outstanding was US$282.7 million, a decrease of US$2.8 million compared to US$285.5 million at the end of the fourth quarter of 2011. The value of the Company's real estate property under development at the end of the first quarter was US$705.3 million compared to US$761.9 million at the end of the fourth quarter of 2011.Project Status Below is a summary table of projects that were active in the first quarter of 2012.GFAContract Sales Project Cost% Complete(sqm 000)(US$ million)ProjectTotal ActiveProjectsSoldto dateTotalActiveProjectsSalesto date%SoldChengdu Splendid I231.0215.1196.7178.790.8%94.8%Chengdu Splendid II216.9185.4228.9197.586.3%93.0%Zhengzhou Modern City255.4203.8351.4265.375.5%70.7%Zhengzhou Royal Palace132.228.0214.767.731.5%66.8%Zhengzhou Century East B166.560.0236.581.534.5%71.2%Kunshan Intl City Garden497.9377.3582.1430.373.9%94.7%Suzhou Intl City Garden204.9164.1314.3256.881.7%98.3%Xuzhou Colorful Garden101.8101.6119.5119.199.7%85.2%Jinan Xinyuan Splendid565.4102.5766.3140.918.4%57.9%Zhengzhou Yipinxiangshan II198.5139.9216.6159.973.8%72.2%Others remaining GFA6.7 Total active projects 2,577.21,577.7 3,227.01,897.7 58.8% 78.4%As of March 31, 2012, the Company's total sellable GFA was approximately 1,403,200 square meters for active projects and pre-revenue stage projects. Below is a summary of all projects at Xinyuan that are in the planning stage:Unsold GFA (sqm 000)FirstPre sales ScheduledZhengzhou Century East A 77.8 Q3 2012Newly Acquired Zhengzhou Land208.3Q4 2012Newly Acquired Xuzhou Land117.6Q4 2012Total projects under planning 403.7Total active projects 999.5Total all Xinyuan projects1,403.2Second Quarter and Full Year 2012 OutlookThe Company expects contract sales in the second quarter of 2012 to be in the range of US$190 to US$200 million. Revenue under the percentage of completion method is expected to range between US$210 and US$220 million and net income in the second quarter is expected to be in the range of US$27.0 to US$30.0 million.For the full year 2012, contract sales are expected to be in the range of US$660 to US$680 million. Revenue under the percentage of completion method is expected to range between US$760 and US$780 million and net income is expected to be in the range of US$97 to US$107 million. Percentage of Completion AccountingXinyuan's projects recognize revenue under the percentage of completion method. This requires the Company to re-evaluate its estimates of future revenues and costs on a quarterly basis project by project. Cumulative revenue = Cumulative contract sales proceeds x Cumulative incurred cost Total estimated project costCumulative cost of sales = Cumulative contract sales x Cumulative incurred cost Total estimated project revenueWhenever Xinyuan makes changes to expected total project life profit margins, a "catch-up" adjustment must be made in the quarter of change to account for the difference between profits previously recognized using the previous profit margin estimate and the comparable profit using the new profit margin estimates. Further, if the updated profit margin indicates that the Company will have to sell units at a price less than its costs to develop them, it must recognize the full expected gross loss over the life of the project at that time regardless of whether the units have been sold. Additionally for such unprofitable projects the Company must also determine whether impairment exists, and, if so, write down the cost to the fair value of the project which, in turn, may be less than the basis after recognizing the effect of future losses.Conference Call InformationXinyuan's management will host an earnings conference call on May 9th, 2012 at 8:00 a.m. U.S. Eastern Time. Listeners may access the call by dialing 1-719-457-2660. A webcast will also be available through the Company's investor relations website at http://www.xyre.com. Listeners may access the replay by dialing 1-858-384-5517, access code: 1737491About 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. Xinyuan focuses on China's Tier II cities, characterized as larger, more developed urban areas with above average GDP and population growth rates. Xinyuan has expanded its network to cover a total population of over 44.7 million people in seven strategically selected Tier II cities, comprising Hefei, Jinan, Kunshan, Suzhou, Zhengzhou, Xuzhou and Chengdu. 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.Safe Harbor StatementThis press release contains 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 can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Statements that are not historical facts, including statements concerning our beliefs, forecasts, estimates and expectations, 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, the risk that: our financing costs are subject to changes in interest rates; our results of operations may fluctuate from period to period; the recognition of our real estate revenue and costs relies on our estimation of total project sales value and costs; we may be unable to acquire desired development sales at commercially reasonable costs; increases in the price of raw materials may increase our cost of sales and reduce our earnings; we are heavily dependent on the performance of the residential property market in China, which is at a relatively early development stage; PRC economic, political and social conditions as well as government policies can affect our business; the market price of our ADSs may be volatile, and other risks outlined in our public filings with the Securities and Exchange Commission, including our annual report on Form 20-F/A for the year ended December 31, 2011. All information provided in this press release is as of May 9, 2012. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.Notes to Unaudited Financial InformationThis 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:Mr. Tom GurneeChief Financial OfficerTel: +86 (10) 8588-9390Email: firstname.lastname@example.orgMs. Helen ZhangFinancial ControllerTel: +86 (10) 8588-9255Email: email@example.comICR, LLCIn U.S.: +1-646-308-1472In China: +86 (10) 6583-7511Email: William.firstname.lastname@example.org XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(All US$ amounts and number of shares data in thousands, except per share data)Three months endedMarch 31,December 31,March 31,201220112011(unaudited)(unaudited)(unaudited)Revenue172,584199,77091,784Cost of revenue(123,357)(143,407)(66,711)Gross profit49,22756,36325,073Selling and distribution expenses(3,472)(3,645)(1,887)General and administrative expenses(8,493)(8,006)(5,501)Operating income37,26244,71217,685Interest income1,3282,582604Exchange gains-133Income from operations before income taxes38,59047,29518,322Income taxes(15,345)(18,986)(6,661)Net income 23,24528,30911,661Less: net income attributable to non-controlling interest 70111413Net income attributable to shareholders22,54428,19511,648Earnings per share: Basic 0.150.190.08 Diluted0.150.190.08Shares used in computation: Basic 145,871147,992153,228 Diluted145,948147,992153,228 XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(All US$ amounts and number of shares data in thousands)March 31,December 31,20122011 (unaudited)(audited)ASSETSCurrent assetsCash and cash equivalents316,516319,218Restricted cash199,198168,384Accounts receivable14,08920,806Other receivables11,57813,352Other deposits and prepayments66,74660,006Advances to suppliers16,08413,579Real estate property development completed6,6356,775Real estate property under development705,311761,871Other current assets917659Total current assets1,337,0741,364,650Real estate properties held for lease, net18,23418,527Property and equipment, net2,8332,981Other long-term investment 242242Deferred tax asset1,3701,307Other assets2,7282,907TOTAL ASSETS1,362,4811,390,614 XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(All US$ amounts and number of shares data in thousands)March 31,December 31,20122011(unaudited)(audited)LIABILITIES ANDSHAREHOLDERS¡&hibar; EQUITYCurrent liabilitiesAccounts payable186,287235,911Short-term bank loans55,80342,950Customer deposits81,76869,524Income tax payable52,68669,908Deferred tax liabilities28,84622,175Other payables and accrued liabilities51,98350,970Payroll and welfare payable4,3887,018Current portion of long-term bank loans and other debt168,708129,404Total current liabilities630,469627,860Non- current liabilitiesLong-term bank loans18,27073,482Unrecognized tax benefits13,83913,824Other long-term debt39,96439,709TOTAL LIABILITIES702,542754,875Shareholders¡&hibar; equityCommon shares1515Treasury shares(7,959)(7,959)Additional paid-in capital509,857509,713Statutory reserves33,57933,579Retained earnings122,63299,280TOTAL SHAREHOLDERS¡&hibar; EQUITY658,124634,628Non-controlling interest1,8151,111TOTAL EQUITY659,939635,739TOTAL LIABILITIES AND EQUITY1,362,4811,390,614SOURCE Xinyuan Real Estate Co., Ltd.