Evergrande to cut debt by 2020

HONG KONG: China Evergrande Group , which has the second-largest debt pile among the nation´s corporates, pledged to slash its debt by 2020 after unveiling a jump in first-half profits that was aided by the early redemption of some bonds.

The country´s No. 3 property developer by sales also announced it is changing its growth strategy to focus on growing profitably, and reduce the size of its land reserves towards that end.

Evergrande said on Monday it aimed to cut its net debt ratio to around 70 percent by June 2020 from 240 percent now, helped partly by the introduction of a third round of strategic investments of 30 billion yuan ($4.53 billion) to 50 billion yuan by its unit, Hengda Real Estate Group, expected after September. As a first step, it aims to lower the ratio to 140 percent by end of June next year, and to 100 percent in the year after.

Its total borrowings stood at 673.5 billion yuan as of end-June. Chief Executive Xia Haijun told an earnings briefing Evergrande would no longer aim to be the largest developer in China by sales, but instead attempt to be the No. 1 by margins. It will start to reduce the scale of land reserve by 5 to 10 percent, or 10 to 20 million square meters, each year, he said.

"In the last 20 years, Evergrande has been chasing scale, but why is Evergrande changing strategy this year? This is because we have the basis for a transformation," said Xia. "Because China´s property market has moved from a golden era to a stable one, so we need to transform."