2014

Xinyuan Real Estate Co., Ltd. Announces Second Quarter 2012 Financial Results -- Completes Best Quarter in History with Record Revenue, Contract Sales and Net Income

-- Company Raises FY12 Financial Forecast

BEIJING, Aug. 10, 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 second quarter of 2012.

Highlights for the Second Quarter 2012

  • Total second quarter revenues were US$253.1 million, a 38.5% increase from US$182.7 million reported in the second quarter of 2011, and a 46.6% increase from US$172.6 million recorded in the first quarter of 2012.
  • Contract sales totaled US$258.0 million, a 14.5% increase from US$225.3 million recorded in the second quarter of 2011, and a 61.6% increase from US$159.7 million recorded in the first quarter of 2012.
  • Total gross floor area ("GFA") sales were 194,500 square meters, a 6.1% increase from 183,400 square meters sold in the second quarter of 2011 and a 69.7% increase from 114,600 square meters sold in the first quarter of 2012.
  • Selling, General, and Administrative ("SG&A") expenses as a percent of total revenue totaled 6.2% compared to 5.6% in the second quarter of 2011 and 6.9% in the first quarter of 2012.
  • Income taxes resulted in a net benefit of US$5.8 million in the second quarter as four projects were settled with the tax authority and the related accrued liabilities were reversed with a net benefit of US$26.6 million recognized in the second quarter.
  • Net income reached US$69.4 million, a 118.2% increase from US$31.8 million reported in the second quarter of 2011 and a 199.1% increase from US$23.2 million in the first quarter of 2012.
  • Diluted net earnings per American Depositary Share ("ADS") attributable to shareholders were US$0.94, compared to diluted net earnings per ADS of US$0.40, in the second quarter of 2011 and US$0.31 per ADS, in the first quarter of 2012.    
  • Cash and cash equivalents, including restricted cash, increased by US$89.0 million to US$604.7 million as of June 30, 2012 from US$515.7 million as of March 31, 2012. Short and long term debt decreased by US$53.8 million to US$228.9 million compared to US$282.7 million as of March 31, 2012.
  • On June 19, 2012 the Board of Directors approved an additional US$20.0 million share repurchase program after the Company had completed its US$10.0 million share repurchase program initiated on May 26, 2011. In the second quarter of 2012 the Company purchased 894,084 ADSs on the open market at a total cost of around US$2.5 million.
  • On July 19, 2012 the Company confirmed a quarterly dividend of US$0.04 per ADS to shareholders payable on August 20, 2012 to shareholders of record on August 3, 2012.
  • In the second quarter of 2012 the Company acquired a portfolio of foreclosed real estate projects in Northern Nevada (Reno area) from a major US bank comprised of 325 finished lots and 185 acres of raw land at 8 different sites at a total cost of approximately US$7.4 million.
  • Yesterday, August 9, 2012, the Company acquired a parcel of land In Suzhou with a total GFA of approximately 128,000 square meters at a cost of RMB270 million(US$42.6 million).

Mr. Yong Zhang, Xinyuan's Chairman and Chief Executive Officer said, "We were pleased to report the best quarter in our operating history with record contract sales, revenue and net income. As China's central bank reduced the reserve requirement ratio and interest rates were lowered to stimulate the economy, the real estate market responded with strong demand. All of our major projects experienced healthy levels of GFA sales and ASP trends."

"Our balance sheet continued to strengthen as our cash increased by US$89 million, while our debt was reduced by US$54 million. Meanwhile, our quarterly dividend payment continued in the second quarter and in June we announced an additional US$20 million share buyback program after completing the US$10 million share buyback program initiated in May 2011."

"Based on the current market environment, we believe that 2012 will be a record year for Xinyuan and we are adjusting our full year financial forecast accordingly. We continue to seek attractive land acquisitions at reasonable prices to ensure  the future development and growth of our business. Our focus on affordable developments targeting homeowners in Tier II and III cities aligns well with government housing policies as well as continued urbanization trends in China."

Financial Results for the Second Quarter 2012

Contract Sales

Contract sales totaled US$258.0 million in the second quarter compared to US$225.3 million in the second quarter of 2011 and US$159.7 million in the first quarter of 2012. The Company's GFA sales were 194,500 square meters in the second quarter of 2012 versus 183,400 square meters in the second quarter of 2011 and 114,600 square meters in the first quarter of 2012. The average selling price per square meter sold was RMB8,367 (US$1,326) in the second quarter of 2012 versus RMB8,034 (US$1,228) in the second quarter of 2011 and RMB8,787 (US$1,393) in the first quarter of 2012.  We did not  reduce  prices on any of our projects as the sequential ASP decline was mainly due to project mix as lower-priced high-rise buildings commenced presales at Zhengzhou Royal Palace and sales of higher-priced retail space at Zhengzhou Modern City decreased significantly from the previous quarter.

Breakdown of GFA Sales and ASP's by Project


Q2 2011

Q1 2012

Q2 2012

Unsold


GFA

ASP

GFA

ASP

GFA

ASP

GFA

Project

(sqm 000)

(Rmb)

(sqm 000)

(Rmb)

(sqm 000)

(Rmb)

(sqm 000)

Chengdu Splendid I

8.9

5,474

2.8

7,048

3.4

5,739

12.5

Chengdu Splendid II

14.2

6,988

20.2

6,829

20.8

6,905

10.7

Zhengzhou Modern City

13.6

8,738

11.3

9,646

12.2

8,399

10.4

Zhengzhou Royal Palace

0.0

0.0

6.7

16,244

18.6

10,058

85.5

Zhengzhou Century East B

10.0

8,664

11.2

8,215

21.1

8,503

85.4

Kunshan Intl City Garden

8.5

10,137

(4.6)

8,201

17.8

7,942

102.8

Suzhou Intl City Garden

3.4

13,255

27.8

9,836

27.5

10,716

13.3

Xuzhou Colorful Garden

17.4

7,751

0.8

7,549

0.3

6,554

0.0

Jinan Xinyuan Splendid

55.7

8,661

16.4

7,723

33.8

7,783

429.1

Zhengzhou Yipinxiangshan II

49.9

6,837

20.7

7,228

36.2

7,192

22.4

Others

1.8

-

1.3

-

2.8

-

3.5

  Total

183.4

8,034

114.6

8,787

194.5

8,367

775.6

                                                                                                                                                                            Revenue under the Percentage of Completion Method

In the second quarter of 2012, the Company's total revenue using the percentage of completion method was US$253.1 million compared to US$182.7 million in the second quarter of 2011 and US$172.6 million in the first quarter of 2012.

Gross Profit

Gross profit for the second quarter of 2012 was US$77.5 million, or 30.6% of revenue, compared to gross profit of US$54.5 million, or 29.8% of revenue, in the second quarter of 2011 and a gross profit of US$49.2 million, or 28.5% of revenue, in the first quarter of 2012.

Each quarter the Company revises total project cost and sales projections for all projects. In the second quarter of 2012 US$7.6 million of cumulative gross profit was recognized under the percentage of completion method due to changes in estimates compared to US$1.0 million being recognized the previous quarter due to changes in estimates. The Company revised total project cost and ASP projections for Zhengzhou Modern City based on recent performance such that US$7.2 million of cumulative gross profit was recognized in the second quarter. This project is expected to sell out by the end of 2012.

Selling, General and Administrative Expenses

SG&A expenses were US$15.8 million for the second quarter of 2012 compared to US$10.2 million for the second quarter of 2011 and US$12.0 million for the first quarter of 2012. As a percentage of total revenue, SG&A expenses were 6.2% compared to 5.6% in the second quarter of 2011 and 6.9% in the first quarter of 2012. Major factors in the sequential SG&A increase were the US$1.3 million catch-up accrual of employee bonuses on an improved outlook for the current fiscal year and an additional expense of US$0.8 million related to share-based compensation.

Net Income

Net income for the second quarter of 2012 was US$69.4 million compared to US$31.8 million for the same period in 2011 and US$23.2 million in the first quarter of 2012. Net margin was 27.4 %, compared to 17.4% in the second quarter of 2011 and 13.5% in the first quarter of 2012. Diluted earnings per ADS were US$0.94, compared to US$0.40 per ADS in the same period in 2011, and US$0.31 per ADS in the first quarter of 2012.  The significant increase of net income and net margin was a result of greater than expected contract sales and the reversal of tax liabilities of approximately US$26.6 million, or US$0.36 per diluted ADS, associated with four completed projects  that were settled with local tax bureaus on favorable terms.

Balance Sheet

As of June 30, 2012, the Company reported US$604.7 million in cash and cash equivalents (including restricted cash) compared to US$515.7 million as of March 31, 2012. Total debt outstanding was US$228.9 million, a decrease of US$53.8 million compared to US$282.7 million at the end of the first quarter of 2012. The value of the Company's real estate property under development at the end of the second quarter was US$635.3 million compared to US$705.3 million at the end of the first quarter of 2012.

Project Status

Below is a summary table of projects that were active in the second quarter of 2012.


GFA

Contract Sales

Project Cost % Complete

(sqm 000)

(US$ million)

Project

Total
Active Projects

Sold to date

Total
Active Projects

Sales to date

%


Sold

Chengdu Splendid I

231.0

218.5

196.8

181.8

92.4%

94.9%

Chengdu Splendid II

216.9

206.2

231.1

220.2

95.3%

92.1%

Zhengzhou Modern City

226.4

216.0

303.4

281.6

92.8%

76.9%

Zhengzhou Royal Palace

132.2

46.7

218.0

97.4

44.7%

70.5%

Zhengzhou Century East B

166.5

81.1

239.8

110.0

45.9%

73.8%

Kunshan Intl City Garden

497.9

395.1

582.8

452.8

77.7%

95.5%

Suzhou Intl City Garden

204.9

191.6

322.7

303.6

94.1%

98.0%

Xuzhou Colorful Garden

101.8

101.8

119.4

119.4

100.0%

92.8%

Jinan Xinyuan Splendid

565.4

136.3

765.9

182.6

23.8%

61.6%

Zhengzhou Yipinxiangshan II

198.5

176.1

223.7

201.1

89.9%

76.2%

Others remaining GFA

3.5






 

Total active projects

2,545.0

1,769.4

3,203.6

2,150.5

67.1%

80.8%

As of June 30, 2012, the Company's total sellable GFA was approximately 1,179,300 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)

First

Pre sales
Scheduled

Zhengzhou Century East A

77.8

 

Q1 2013

Newly Acquired  Zhengzhou Land

208.3

Q2 2013

Newly Acquired Xuzhou Land

117.6

Q1 2013

Total projects under planning

403.7


Total active projects

775.6


Total all Xinyuan projects

1,179.3


Third Quarter and Full Year 2012 Outlook

The Company expects contract sales in the third quarter of 2012 to be in the range of US$215-225 million. Revenue under the percentage of completion method is expected to range between US$225 and US$235 million and net income in the third quarter is expected to be in the range of US$30.0 to US$33.0 million.

Fourth quarter contract sales, revenue, and net income are expected to be lower than the third quarter on lower sellable inventory as project sell outs at Suzhou International City Garden, Chengdu Xinyuan Splendid, Zhengzhou Modern City, and Zhengzhou Yipinxiangshan will not be offset by new projects until early 2013.

For the full year 2012, contract sales are expected to be in the range of US$770 to US$790 million. Revenue under the percentage of completion method is expected to range between US$825 and US$845 million and net income is expected to be in the range of US$130 to US$140 million.                                                                                                                                          

Percentage of Completion Accounting

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 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 Information

Xinyuan's management will host an earnings conference call on August 10th, 2012 at 8:30 a.m. U.S. Eastern Time. Listeners may access the call by dialing 1-719-325-2402. 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: 6634925.

About 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 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; 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 August 10, 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 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
Financial Controller
Tel: +86 (10) 8588-9255
Email: yuan.z@xyre.com

ICR, LLC
In U.S.: +1-646-308-1472
In China: +86 (10) 6583-7511
Email: William.zima@icrinc.com

 (Financial Tables on Following Pages)



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



June 30,


March 31,


June 30,



2012


2012


2011



(unaudited)


(unaudited)


(unaudited)









Revenue

253,059


172,584


182,682









Cost of revenue

(175,569)


(123,357)


(128,195)


Gross profit

77,490


49,227


54,487









Selling and distribution expenses

(4,825)


(3,472)


(3,904)


General and administrative expenses

(10,974)


(8,493)


(6,271)









Operating income

61,691


37,262


44,312









Interest income

1,923


1,328


878


Exchange gains

-


-


23


Income from operations before income taxes

63,614


38,590


45,213


Income taxes

5,752


(15,345)


(13,399)


Net income

69,366


23,245


31,814


Less: net income attributable to non-controlling interest 

410


701


639


Net income attributable to shareholders

68,956


22,544


31,175









Earnings per share:







  Basic

0.95


0.31


0.40


  Diluted

0.94


0.31


0.40


Shares used in computation:







  Basic

72,955


72,936


76,581


  Diluted

73,480


72,974


76,581







XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All US$ amounts and number of shares data in thousands, except per share data)







Six months ended




June 30,


June 30,


2012


2011


(unaudited)


(unaudited)

Revenue

425,643


274,466





Cost of revenue

(298,926)


(194,906)

Gross profit

126,717


79,560





Selling expenses

(8,297)


(5,791)

General and administrative expenses

(19,467)


(11,772)





Operating income

98,953


61,997





Interest income

3,251


1,482





Exchange gains

-


56





Income from operations before income taxes

102,204


63,535





Income taxes

(9,593)


(20,060)





Net income

92,611


43,475

Less: net income attributable to non-controlling interest

1,111


652





Net income attributable to shareholders

91,500


42,823





Earnings per share:




  Basic

1.25


0.56

  Diluted

1.25


0.56

Shares used in computation:




  Basic

72,945


76,598

  Diluted

73,200


76,598

 

XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(All US$ amounts and number of shares data in thousands)

 



June 30,


March 31,


December 31,




2012


2012


2011




   (unaudited)


   (unaudited)


(audited)


ASSETS








Current assets








Cash and cash equivalents


421,378


316,516


319,218


Restricted cash


183,286


199,198


168,384


Accounts receivable


6,598


14,089


20,806


Other receivables


14,759


11,578


13,352


Other deposits and prepayments


75,838


66,746


60,006


Advances to suppliers


18,427


16,084


13,579


Real estate property development completed


2,328


6,635


6,775


Real estate property under development


635,255


705,311


761,871


Other current assets


8,855


917


659


Total current assets


1,366,724


1,337,074


1,364,650










Real estate properties held for lease, net


23,538


18,234


18,527


Property and equipment, net


2,691


2,833


2,981


Other long-term investment


240


242


242


Deferred tax asset


1,519


1,370


1,307


Other assets


2,471


2,728


2,907










TOTAL ASSETS


1,397,183


1,362,481


1,390,614


 

XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(All US$ amounts and number of shares data in thousands)

 




June 30,


March 31,


December 31,





2012


2012


2011





(unaudited)


(unaudited)


(audited)


LIABILITIES AND









SHAREHOLDERS' EQUITY









Current liabilities









Accounts payable



209,634


186,287


235,911


Short-term bank loans



66,819


55,803


42,950


Customer deposits



106,426


81,768


69,524


Income tax payable



30,524


52,686


69,909


Deferred tax liabilities



32,712


28,846


22,175


Other payables and accrued liabilities



52,755


51,983


50,970


Payroll and welfare payable



8,247


4,388


7,018


Current portion of long-term bank loans and other debt

 

162,115


 

168,708


129,403











Total current liabilities



669,232


630,469


627,860











Non- current liabilities









Long-term bank loans



-


18,270


73,482


Unrecognized tax benefits



8,787


13,839


13,824


Other long-term debt



-


39,964


39,709


TOTAL LIABILITIES



678,019


702,542


754,875











Shareholders' equity









Common shares



15


15


15


Treasury shares



(10,496)


(7,959)


(7,959)


Additional paid-in capital



510,894


509,857


509,713


Statutory reserves



33,579


33,579


33,579


Retained earnings



185,172


122,632


99,280


TOTAL SHAREHOLDERS' EQUITY



719,164


658,124


634,628











Non-controlling interest



-


1,815


1,111











TOTAL EQUITY



719,164


659,939


635,739











TOTAL LIABILITIES AND EQUITY



1,397,183


1,362,481


1,390,614


 

 

SOURCE Xinyuan Real Estate Co., Ltd.



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