BEIJING, Nov. 9 /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 third quarter ended September 30, 2009.
Highlights for the Third Quarter 2009
-- Total revenues were US$128.2 million, compared to US$91.8 million in
the second quarter of 2009 and US$83.0 million for the same period of
2008.
-- Contract sales totaled US$159.0 million in the third quarter of 2009
versus US$100.5 million in the second quarter of 2009 and $69.7 million
for the third quarter of 2008.
-- Total gross floor area ("GFA") sales were 184,500 square meters,
compared to 128,500 square meters in the second quarter of 2009 and
93,900 square meters for the same period of 2008.
-- Selling, General, and Administrative ("SG&A") expenses as a percent of
total revenue declined to 7.0% compared to 8.1% in the second quarter
of 2009 and 16.3% for the third quarter of 2008.
-- Net income was US$15.4 million, compared to net income of US$3.9
million in the second quarter of 2009 and US$7.9 million for the same
period of 2008.
-- Diluted net income per share attributable to ordinary shareholders was
US$0.10, equivalent to US$0.20 per American Depositary Share ("ADS")
compared to diluted net income per share of US$0.02, equivalent to
US$0.04 per ADS in the second quarter of 2009, and diluted net income
per share of US$0.05, equivalent to US$0.10 per ADS in the third
quarter of 2008.
-- Cash and cash equivalents, including restricted cash, increased by
US$67.6 million to US$304.5 million as of September 30, 2009 from
US$236.9 million as of June 30, 2009.
-- Debt decreased by US$28.8 million to US$333.0 million compared to
US$361.8 million as of June 30, 2009.
-- One new land parcel was acquired in September and three land parcels
were acquired in October.
-- The Company updates 2009 full year financial guidance
"Our third quarter revenue accelerated significantly on both a sequential and year-over-year basis as all of our active projects realized growth in average selling prices ("ASPs") and GFA sales during the quarter. Combined with the cost reduction actions we have taken over the past several quarters, we were able to report a significant improvement in our overall profitability. Our balance sheet also continued to strengthen as we generated more than US$67 million of cash during the quarter, while reducing our outstanding borrowings," said Mr. Yong Zhang, Xinyuan's Chairman and Chief Executive Officer. "The growth in the Chinese economy is driving urbanization, real estate demand and further development, and we expect these positive conditions to continue. Xinyuan is well-positioned against this favorable backdrop as our strategy continues to focus on high-quality developments in attractive, high-growth markets."
Financial Results for the Third Quarter
For the quarter ended September 30, 2009, the Company's total revenue using the percentage of completion method was US US$128.2 million compared to US$91.8 million in the second quarter ended June 30, 2009 and US$83.0 million in the third quarter of 2008.
The Company GFA sales were 184,500 square meters in the third quarter of 2009, versus 128,500 square meters in the third quarter of 2009, and 93,900 square meters in the third quarter of 2008. Contract sales totaled US$159.0 million in the third quarter compared to US$100.5 million in the second quarter and the average selling price per square meter sold (ASP) increased by 10.2% reaching RMB5,886 (US$862) for the third quarter of 2009 compared to RMB5,343 (US$782) for the second quarter of 2009.
Breakdown of GFA Sales and ASP's by Project
Q1 2009 Q2 2009 Q3 2009 Unsold
GFA ASP GFA ASP GFA ASP GFA
Project (m2 000) (Rmb) (m2 000) (Rmb) (m2 000) (Rmb) (m2 000)
Chengdu Splendid 6.8 4,100 24.3 4,296 34.9 4,723 151.1
Henan Colorful
Garden 14.9 5,452 32.5 5,674 33.4 6,411 64.0
Kunshan Intl
City Garden 8.9 4,749 36.0 4,864 59.1 5,758 381.8
Shandong Intl
City Garden 10.8 5,402 19.5 5,152 33.6 5,248 25.5
Suzhou Colorful
Garden 1.3 7,344 6.7 7,641 11.7 8,384 11.6
Suzhou Intl
City Garden 3.1 6,863 8.3 7,515 8.8 8,071 158.8
Others 1.4 10,558 1.1 7,210 3.1 7,002 2.6
Total 47.1 5,405 128.5 5,343 184.5 5,886 795.4
Gross Profit
Gross profit for the third quarter of 2009 was US$26.1 million, or 20.4% of revenue, compared to gross profit of US$15.5 million, or 16.8% of revenue, in the second quarter of 2009 and US$18.4 million, or 22.2% of revenue, in the third quarter of 2008.
The Company revised total project cost and sales cost estimates for certain projects such that US$6.6 million of cumulative gross profit was recognized in the third quarter under the percentage of completion method due to a change in estimates. This was primarily driven by a US$12.3 million increase in estimated sales of the Henan Colorful Garden project as it became clear based on sales activity in the third quarter that this mature project would exceed earlier ASP projections. The increase in the sales estimate for this project resulted in higher gross profit of US$6.4 million.
Selling, General, and Administrative Expenses
SG&A expenses were US$9.0 million for the third quarter of 2009 compared to US$7.5 million for the second quarter of 2009 and US$13.5 million for the third quarter of 2008. As a percentage of total revenue, SG&A expenses declined to 7.0% compared to 8.1% in the second quarter of 2009 and 16.3% in the third quarter of 2008.
Advertising and promotion expenses increased by US$0.8 million, from US$1.8 million in the second quarter 2009 to US$2.6 million in the third quarter 2009 as the Company continued to increase traffic and take advantage of an improved selling environment. Compensation costs increased by US$0.6 million compared to the second quarter of 2009 due to higher variable compensation as we accrued pro rata for full annual bonuses as it became evident that the Company would exceed its 2009 sales targets. Stock-based compensation totaled US$0.8 million in the third quarter of 2009 versus US$0.9 million in the second quarter of 2009 and US$1.5 million in the third quarter of 2008. Total company headcount was 384 employees as of September 30, 2009, down from 397 as of June 30, 2009 and 645 as of December 31, 2008.
Share of Income of Equity Investee
In the third quarter of 2009, the Company recognized book income of US$2.3 million from its 45% stake in Zhengzhou Jiantou Xinyuan Real Estate Co. Ltd ("Jiantou Xinyuan") compared to book income of US$2.5 million in the second quarter of 2009 and book income of US$3.2 million in the third quarter of 2008.
Change in Fair Value of Warrant Liabilities
A decrease in the Company's ADS price from US$6.48 at June 30, 2009 to US$4.64 at September 30, 2009 led to a decrease in the fair value of outstanding warrants resulting in a non-cash credit to income of US$1.6 million for the third quarter of 2009.
Net Income
Net income for the third quarter 2009 was US$15.4 million compared to US$3.9 million in the second quarter of 2009 and US$7.9 million for the same period in 2008. Diluted earnings per share for the third quarter of 2009 was US$0.10, compared to US$0.02 in the second quarter of 2009 and US$0.05 for the same period in 2008.
Balance Sheet
As of September 30, 2009, the Company reported US$304.5 million in cash and cash equivalents (including restricted cash) compared to US$236.9 million as of June 30, 2009. Total debt outstanding was US$333.0 million, a decrease of US$28.8 million compared to US$361.8 million at the end of the second quarter of 2009. Real estate property under development was US$495.8 million as of September 30, 2009 compared to US$584.4 million as of June 30, 2009 and US$725.5 million as of September 30, 2008.
Update on Share Transfer of Jiantou Xinyuan Joint Venture
On September 30, the Company announced its wholly owned subsidiary, Henan Xinyuan Real Estate Co., Ltd. ("Xinyuan China"), signed an agreement to acquire the remaining 55% equity interest in Jiantou Xinyuan it does not already own. Following the completion of the transaction, Jiantou Xinyuan ("JianXin") will become an indirect, wholly-owned subsidiary of the Company. Since the other two parties of the joint venture are state-owned enterprises, the transaction is subject to the governmental approval process for state-owned assets. Xinyuan China has submitted the required documents to the local State-owned Assets Supervision and Administration Commission (SASAC) for approval. The Company expects to receive SASAC approval by the end of the 2009, allowing completion of the transaction. As of September 30, 2009 JianXin had three active projects with approximately 78,000 square meters unsold GFA and one project under planning with a GFA of approximately 198,000 square meters.
Land Acquisition and Land Bank Reserve
The Company contracted to acquire one land parcel during the third quarter and an additional three land parcels in October 2009. The total site area of the new land acquisitions is approximately 325,000 square meters and total expected buildable GFA is approximately 888,000 square meters. As of November 9, 2009, the Company's total land bank is approximately 1,379,000 square meters of buildable GFA, including new acquisitions and projects under planning in Chengdu (219,000 m2) and Zhengzhou (265,000 m2) but excluding active projects and Jiantou Xinyuan's land bank.
Location Acquisition Site Area Total GFA Land Price
Date (m2) (m2) Rmb M US$ M Rmb per
GFA m2
Zhengzhou 2009-9-23 22,417 77,825 138.1 20.2 1,775
Zhengzhou 2009-10-23 56,100 190,152 395.0 57.9 2,077
Xuzhou 2009-10-27 46,777 93,100 212.5 31.1 2,282
Jinan 2009-10-29 200,180 526,990 1,136.0 166.4 2,156
Total 325,474 888,067 1,881.6 275.7
The table below sets out similar information about JianXin's projects under planning, assuming Xinyuan China completes the acquisition of JianXin by the end of 2009.
Location Acquisition Site Area Total GFA Land Price
Date (m2) (m2) Rmb M US$ M Rmb per
GFA m2
Zhengzhou Est 12/31/09 81,415 198,400 253.9 37.2 1,280
2009 Outlook
Fourth quarter 2009 GFA sales are expected to range from 150,000 to 160,000 square meters, down slightly from the third quarter 2009 due to an expected seasonal softening in December. Fourth quarter contract sales are expected to reach US$135 million to US$145 million. Fourth quarter revenue using the percentage of completion method is expected to total US$120 million to US$130 million and net income is expected to be in the range of US$9 million to US$11 million.
Full year 2009 GFA sales are expected to range from 510,000 to 520,000 square meters. Fiscal 2009 contract sales are expected to total approximately US$430 million to US$440 million. Fiscal 2009 revenue using the percentage of completion method is expected to range from US$380 million to US$390 million. Fiscal 2009 net income is expected to be in the range of US$29 million to US$31 million.
Mr. Zhang commented, "We have made considerable progress over the past two months in building our growth pipeline for 2010 and beyond. We acquired two parcels of land in Zhengzhou, bolstering our presence in this high-growth market where we have realized solid returns. Combined with our recent acquisition of two parcels of land in Xuzhou and Jinan, the four new parcels we have acquired since September will increase our future land bank by approximately 325,000 square meters and are expected to generate GFA sales of approximately 880,000 square meters. We also entered into an agreement to acquire the remaining interest in our Jiantou Xinyuan, which would increase the size of our buildable GFA by an additional 198,000 square meters. We are encouraged by the prospects for all of these projects as we continue to expand our presence in Tier II markets and position our Company for sustainable, long-term growth."
Percentage of Completion Accounting
Most of Xinyuan'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 cost
Cumulative cost of sales = Cumulative contract sales x Cumulative
incurred cost
-------------------------------
Total estimated project revenue
Whenever 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 profit 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 an 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. Except as discussed above with respect to the Zhengzhou Colorful Garden project, there were no significant changes in estimates in the third quarter of 2009.
Conference Call Information
Xinyuan's management will host an earnings conference call on November 9, 2009 at 8:00 a.m. U.S. Eastern Time. Listeners may access the call by dialing 1-719-457-2643. 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 1-719-457-0820, access code: 4240623.
About Xinyuan Real Estate Co., Ltd.
Xinyuan Real Estate Co., Ltd. (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 34.5 million people in six strategically selected Tier II cities, comprising of Hefei, Jinan, Kunshan, Suzhou, Zhengzhou, Chengdu and Xuzhou. 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 Statement
This 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; 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; our results of operations may fluctuate from period to period; the market price of our ADSs may be volatile; we may not be able to successfully acquire the remaining 55% equity interest in Jiantou Xinyuan, 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, 2008. All information provided in this press release is as of November 9, 2009. 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 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:
Mr. Tom Gurnee
Chief Financial Officer
Tel: +86-10-8588-9390
Email: tom.gurnee@xyre.com
Ms. Helen Zhang
Director of Investor Relations
Tel: +86-10-8588-9255
Email: yuan.z@xyre.com
In the United States:
Mr. Bill Zima
ICR, LLC
Tel: +1-203-682-8200
Email: Bill.zima@icrinc.com
Ms. Kate Messmer
ICR, LLC
Tel: +1-203-682-8338
Email: kate.messmer@icrinc.com
(Financial Tables to Follow)
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,
2009 2009 2008
Revenue 128,180 91,767 82,951
Cost of revenue (102,095) (76,316) (64,569)
Gross profit 26,085 15,451 18,382
Selling and distribution
expenses (3,044) (2,377) (5,251)
General and administrative
expenses (5,923) (5,079) (8,249)
Operating income 17,118 7,995 4,882
Interest income 623 499 559
Share of income in an equity
investee 2,298 2,491 3,186
Exchange gains/ (losses) 30 42 668
Other expenses (383) -- --
Change in fair value of
warrant liabilities 1,585 (1,613) 2,026
Income from operations
before income taxes 21,271 9,414 11,321
Income taxes (5,862) (5,538) (3,536)
Net income 15,409 3,876 7,785
Earnings per share:
Basic 0.10 0.03 0.05
Diluted 0.10 0.02 0.05
Shares used in computation:
Basic 151,363 151,146 149,007
Diluted 160,982 160,754 160,200
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,
2009 2008
Revenue 259,886 295,811
Cost of revenue (211,873) (220,148)
Gross profit 48,013 75,663
Selling and distribution
expenses (6,152) (11,257)
General and administrative
expenses (14,928) (25,551)
Operating income 26,933 38,855
Interest income 1,421 2,806
Share of income in an equity
investee 5,820 10,487
Exchange gains 58 4,422
Other expense (383) --
Change in fair value of warrant
liabilities (273) 16,098
Income from operations before
income taxes 33,576 72,668
Income taxes (13,165) (18,759)
Net income 20,411 53,909
Earnings per share:
Basic 0.14 0.36
Diluted 0.13 0.34
Shares used in computation:
Basic 151,188 148,601
Diluted 160,801 160,680
XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All US$ amounts and number of shares data in thousands)
September 30, December 31,
2009 2008
(unaudited)
ASSETS
Current assets
Cash and cash equivalents 218,008 135,659
Restricted cash 86,481 57,951
Accounts receivable 4,121 5,320
Other receivables 6,749 20,229
Other deposits and prepayments 38,077 28,989
Advances to suppliers 2,827 733
Real estate property development completed 326 328
Real estate property under development 390,199 520,496
Other current assets 2,573 8,308
Total current assets 749,361 778,013
Real estate property under development 105,601 102,707
Real estate properties held for lease, net 14,564 14,851
Property and equipment, net 4,892 5,255
Other long-term investment 242 242
Interests in an equity investee 25,967 20,157
Deferred tax asset 3,450 6,829
Other assets 5,548 8,112
TOTAL ASSETS 909,625 936,166
XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All US$ amounts and number of shares data in thousands)
September 30, December 31,
2009 2008
(unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable 82,339 89,032
Short-term bank loans 165,231 168,967
Customer deposits 8,011 14,252
Income tax payable 6,856 6,263
Deferred tax liabilities 16,833 21,513
Other payables and accrued liabilities 23,217 20,114
Payroll and welfare payable 1,985 2,210
Warrant liabilities 443 --
Current portion of long-term debt 76,129 95,638
Total current liabilities 381,044 417,989
Non-Current Liabilities
Long-term bank loans 67,653 105,007
Warrant liabilities -- 170
Unrecognized tax benefits 12,979 12,745
Other long-term debt 23,953 --
TOTAL LIABILITIES 485,629 535,911
Shareholders' equity
Common Shares 15 15
Additional paid-in capital 502,170 499,155
Retained earnings (accumulated deficit) (91,356) (112,082)
Statutory reserves 13,167 13,167
TOTAL SHAREHOLDERS' EQUITY 423,996 400,255
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 909,625 936,166