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Evergrande Joins China Developers Set to Miss Earnings Deadline

An aerial view of China Evergrande Group's Riverside Palace development under construction in Taicang, Jiangsu province, China, on Friday, Sept. 24, 2021. China's housing regulator has stepped up oversight of China Evergrande Group's bank accounts to ensure funds are used to complete housing projects and not diverted to pay creditors. Photographer: Qilai Shen/Bloomberg

China Evergrande Group joined a handful of Chinese developers to warn they will probably miss deadlines for reporting audited 2021 results this month.

Evergrande and its two Hong Kong-listed units expect to delay publishing the results by March 31 because audit work hasn’t been completed, a stock exchange filing showed Tuesday. Sunac China Holdings Ltd. and Shimao Group Holdings Ltd. issued similar statements Monday night.

The companies blamed the latest Covid-19 wave in China for the delays, while Evergrande also said “drastic changes” in the operating environment added to audit procedures. Shimao and Sunac plan to release unaudited 2021 results on March 31. Evergrande said it will publish audited results “as soon as practicable” after audit procedures are completed. It will issue a separate statement to inform investors of its expected results release date.

Chinese property firms listed in Hong Kong face a March 31 deadline to file annual results, their first audited financial statements since the industry’s liquidity crisis spread. Transparency and governance concerns have cropped up alongside worries about developers’ ability to repay debt following a record number of defaults last year.

Read about Chinese developers’ need to come clean on debt

Evergrande also announced plans to appoint King & Wood Mallesons as an additional legal adviser to handle debt risks. The firm’s risk management committee is “actively looking for solutions and communicating with its creditors,” it said.

The company’s shares were suspended on Monday pending an announcement containing “inside information.”

Covid Effects

Sunac said that “due to the restrictions on travel, logistics and others in mainland China and Hong Kong as a result of the recent Covid-19 pandemic, the audit procedures of the group could not be completed as scheduled.” In a separate statement, Sunac said it expects 2021 profit fell about 85% due to factors including the sector’s challenges in the second half of last year.

Shimao said its audit process has been affected by certain management and employees being placed under quarantine during the latest Covid wave. The company also said there has been a delay in obtaining “certain external confirmations from third parties” for the audit.

Shimao estimates audited annual results will be published on or before April 30. Its onshore unit said in January that it was changing its auditor for the first time in 27 years.

Ronshine China Holdings Ltd. said on Monday that it won’t file audited results by March 31, and it too said its process was affected by Covid impacts. Accountant PricewaterhouseCoopers LLC was unable to complete its work partly because the supply of requested information had fallen behind schedule, Ronshine said, and the firm resigned. That came after at least four other auditors resigned or were replaced by builders since the start of this year.

Firms listed on the Hong Kong Stock Exchange typically see their shares halted if they are unable to release audited annual figures three months after their fiscal year ends. Dozens of companies’ stocks had trading stopped April 1, 2021, for not meeting the requirement, notably China Huarong Asset Management Co. It remained halted for nine months.

However, firms that release preliminary results by March 31 and show Covid-related issues in finalizing audit work can get an extension to avoid a trading halt. Companies still need to file their annual reports by April 30 to prevent a possible trading suspension, according to exchange listing rules.

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