Xinyuan Real Estate Co., Ltd. Announces second Quarter 2011 Financial Results

- Company Raises Full Year Revenue and Net Income Forecast -

Aug 09, 2011, 07:30 ET from Xinyuan Real Estate Co., Ltd.

BEIJING, Aug. 9, 2011 /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 2011.

Highlights for the Second Quarter 2011

  • Total second quarter revenues were US$182.7 million, a 93% increase from US$94.5 million reported in the second quarter of 2010, and 99% increase from US$91.8 million recorded in the first quarter of 2011.
  • Contract sales totaled US$225.3 million, a 132% increase from US$97.0 million recorded in the second quarter of 2010, and 130% increase from the US$98.0 million recorded in the first quarter of 2011. Two new projects were launched in the second quarter.
  • Total gross floor area ("GFA") sales were 183,400 square meters, a 113% increase from 86,200 square meters sold in the second quarter of 2010 and 125% increase from 81,600 square meters sold in the first quarter of 2011.
  • Selling, General, and Administrative ("SG&A") expenses as a percent of total revenue declined to 5.6% compared to 8.9% in the second quarter of 2010 and 8.0% in the first quarter of 2011.
  • Net income was US$31.8 million, a 231% increase from US$9.6 million reported in the second quarter of 2010 and a 172% increase from US$11.7 million in the first quarter of 2011.
  • Diluted net earnings per share attributable to ordinary shareholders were US$0.20, equivalent to US$0.40 per American Depositary Share ("ADS"), compared to diluted net earnings per share of US$0.06, equivalent to US$0.12 per ADS, in the second quarter of 2010 and US$0.08, equivalent to US$0.16 per ADS, in the first quarter of 2011.
  • Cash and cash equivalents, including restricted cash, increased by US$58.3 million to US$406.9 million as of June 30, 2011 from US$348.6 million as of March 31, 2011. Short and long term debt decreased by US$5.5 million to US$318.0 million compared to US$323.5 million as of March 31, 2011.
  • On June 20, 2011, the Company paid a cash dividend of US$0.10 per ADS to shareholders of record on June 10, 2011.
  • On May 26, 2011, the Company announced its intent to repurchase shares up to US$10 million. As of June 30, 2011, 593,600 ADS were repurchased at a total cost of US$1.26 million.

Mr. Yong Zhang, Xinyuan's Chairman and Chief Executive Officer said, "We are pleased to report a remarkable quarter with contract sales, revenue and net income well above the high end of our expectations despite the impact of mortgage and purchase restriction policies issued by regional governments beginning in the month of February and continuing until today. Our marketing initiatives contributed to healthy sales demand in the second quarter and we believe that consumers will continue to adjust to government policy initiatives."

"We successfully launched two new projects in the second quarter, namely Jinan Xinyuan Splendid and Zhengzhou Central East B, which contributed 39% of the Company's total contract sales. We expect to launch one new project Zhengzhou Royal Palace in the third quarter. We were pleased to be able to return some money to shareholders in the form of a dividend in the second quarter and we also implemented a US$10 million share buyback program that will continue for one year. While market trends will continue to be challenging due to tightening in mortgage and purchase restrictions, Xinyuan is well positioned with its strong balance sheet and a diversified project pipeline."

Financial Results for the Second Quarter 2011

Contract Sales

Contract sales totaled US$225.3 million in the second quarter compared to US$97.0 million in the second quarter of 2010 and US$98.0 million in the first quarter of 2011. The Company's GFA sales were 183,400 square meters in the second quarter of 2011 versus 86,200 square meters in the second quarter of 2010 and 81,600 square meters in the first quarter of 2011. The average selling price per square meter sold was RMB8,034 (US$1,228) in the second quarter of 2011 versus RMB7,683 (US$1,126) in the second quarter of 2010 and RMB7,908 (US$1,201) in the first quarter of 2011.

Contract sales growth in the second quarter was primarily driven by the successful marketing of two new projects, Jinan Xinyuan Splendid, launched in the second quarter, and Zhengzhou Yipinxiangshan II, launched late in the first quarter, which accounted for 33% and 23% of the second quarter contract sales, respectively.

Breakdown of GFA Sales and ASP's by Project

Q2 2010

Q1 2011

Q2 2011

Unsold

GFA

ASP

GFA

ASP

GFA

ASP

GFA

Project

(m2 000)

(Rmb)

(m2 000)

(Rmb)

(m2 000)

(Rmb)

(m2 000)

Chengdu Splendid I

4.6

5,699

5.3

5,266

8.9

5,474

32.4

Chengdu Splendid II

18.2

6,053

28.3

7,045

14.2

6,988

89.1

Zhengzhou Colorful Garden

11.4

8,130

2.2

11,512

1.6

14,739

4.9

Zhengzhou Modern City

22.0

7,167

11.9

8,217

13.6

8,738

95.8

Zhengzhou Century East B

-

-

-

-

10.0

8,664

156.5

Kunshan Intl City Garden

24.0

8,446

4.0

11,336

8.5

10,137

137.0

Suzhou Intl City Garden

5.6

11,340

2.1

14,800

3.4

13,255

99.9

Xuzhou Colorful Garden

-

-

21.3

7,321

17.4

7,751

9.8

Jinan Xinyuan Splendid

-

-

-

-

55.7

8,661

472.6

Zhengzhou Yinpinxiangshan I

-

-

2.8

10,204

0.2

17,294

0.4

Zhengzhou Yinpinxiangshan II

-

-

3.7

8,192

49.9

6,837

144.8

Others

0.4

19,584

-

-

-

-

4.7

 Total

86.2

7,683

81.6

7,908

183.4

8,034

1,247.9

Revenue under the Percentage of Completion Method

In the second quarter of 2011, the Company's total revenue using the percentage of completion method was US$182.7 million compared to US$94.5 million in the second quarter of 2010 and US$91.8 million in the first quarter of 2011. Versus the previous quarter, this quarter's increase in revenue under the percentage of completion method is mainly due to two factors: the increase in contract sales and the achievement of accelerated construction milestones in our projects.

Gross Profit

Gross profit for the second quarter of 2011 was US$54.5 million, or 29.8% of revenue, compared to gross profit of US$20.2 million, or 21.3% of revenue, in the second quarter of 2010 and a gross profit of US$25.1 million, or 27.3% of revenue, in the first quarter of 2011.

The Company revised total project cost and sales projections for certain projects such that US$1.1 million of cumulative gross profit was recognized in the second quarter of 2011 under the percentage of completion method due to changes in estimates.

Selling, General, and Administrative Expenses

SG&A expenses were US$10.2 million for the second quarter of 2011 compared to US$8.4 million for the second quarter of 2010 and US$7.4 million for the first quarter of 2011. As a percentage of total revenue, SG&A expenses were 5.6% compared to 8.9% in the second quarter of 2010 and 8.0% in the first quarter of 2011. The increase in SG&A expenses was mainly due to increased promotional spending on new projects and sales agent commissions.

Share-based Compensation

Share-based compensation was US$0.5 million for the second quarter of 2011 compared to US$0.7 million for the second quarter of 2010 and US$0.5 million for the first quarter of 2011.

Net Income

Net income for the second quarter of 2011 was US$31.8 million compared to US$9.6 million for the same period in 2010 and US$11.7 million in the first quarter of 2011. Net margin was 17%, compared to 10% in the second quarter of 2010 and to 13% in the first quarter of 2011. Diluted earnings per share for the second quarter of 2011 were US$0.20, equivalent to US$0.40 per ADS, compared to a profit of US$0.06 per diluted share, equivalent to US$0.12 per ADS, for the same period in 2010, and US$0.08 per diluted share, equivalent to US$0.16 per ADS in the first quarter of 2011.  

Balance Sheet

As of June 30, 2011, the Company reported US$406.9 million in cash and cash equivalents (including restricted cash) compared to US$348.6 million as of March 31, 2011. Total debt outstanding was US$318.0 million, a decrease of US$5.5 million compared to US$323.5 million at the end of the first quarter of 2011. The Company's real estate property under development at the end of the second quarter was US$695.1 million compared to US$669.1 million at the end of the first quarter of 2011.

Project Status

Below is a summary table of projects that were active in the second quarter of 2011.

GFA

Contract Sales

 Project Cost  % Complete

(m000)

(US$ million)

Project

Total  Project

Sold to  date

Total  Project

Sales  to date

%

Sold

Chengdu Splendid I

230.9

198.5

185.6

153.0

82.4%

93.2%

Chengdu Splendid II

219.5

130.4

221.7

132.4

59.7%

72.5%

Zhengzhou Colorful Garden

191.9

187.0

196.4

188.8

96.1%

99.8%

Zhengzhou Modern City

255.4

159.6

323.2

183.8

56.9%

59.4%

Zhengzhou Century East B

166.5

10.0

229.1

13.2

5.8%

58.4%

Kunshan Intl City Garden

497.0

360.0

553.6

388.3

70.1%

83.4%

Suzhou Intl City Garden

205.6

105.7

312.1

155.0

49.6%

95.2%

Xuzhou Colorful Garden

102.1

92.3

112.8

102.3

90.7%

71.0%

Jinan Xinyuan Splendid

528.3

55.7

737.3

73.7

10.0%

49.1%

Zhengzhou Yipinxiangshan I

94.4

94.0

93.5

91.1

97.5%

97.4%

Zhengzhou Yipinxiangshan II

198.5

53.7

193.9

56.8

29.3%

60.1%

Others remaining GFA

4.7

-

-

-

-

-

Total active projects

2,694.8

1,446.9

3,159.2

1,538.4

48.7%

72.7%

As of June 30, 2011, the Company's total sellable GFA was approximately 1,460,000 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 (m2 000)

First Pre sales Scheduled

Zhengzhou Royal Palace

134.2

Q3 2011

Zhengzhou Century East A

77.8

Q1 2012

Total Xinyuan projects in planning

212.0

Total active projects

1,247.9

Total Xinyuan projects

1,459.9

Third Quarter and 2011 Outlook

Based on strong sales recorded in the second quarter, the positive acceptance of new projects in Jinan and Zhengzhou, and the launch of one new project in the third quarter (Zhengzhou Royal Palace), the Company expects its sales momentum to continue in the second half of 2011.

The Company expects contract sales in the third quarter of 2011 to reach US$230 to US$250 million. Revenue under the percentage of completion method is expected to range between US$215 and US$235 million while net income in the quarter should exceed US$35 million.

For the full year 2011 the Company is raising its guidance significantly. Contract sales are expected to total US$810 to US$850 million for the year, up approximately 25% over previous guidance. Revenue under the percentage of completion method is projected to range from US$740 to US$780 million while net income for the year is expected to exceed US$100 million, 33% above previous guidance.

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 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.

Conference Call Information

Xinyuan's management will host an earnings conference call on August 9, 2011 at 8:30 a.m. U.S. Eastern Time. Listeners may access the call by dialing 1-719-457-2640. 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: 1874708.

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 for the year ended December 31, 2010. All information provided in this press release is as of August 9, 2011. 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

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,

2011

2011

2010

(unaudited)

(unaudited)

(unaudited)

 

 

 

 

 

Revenue

182,682

91,784

94,454

 

 

 

 

 

 

Cost of revenue

(128,195)

(66,711)

(74,298)

 

Gross profit

54,487

25,073

20,156

 

 

 

 

 

 

Selling and distribution expenses

(3,904)

(1,887)

(2,535)

 

General and administrative expenses

(6,271)

(5,501)

(5,885)

 

 

 

 

 

 

Operating income

44,312

17,685

11,736

 

 

 

 

 

 

Interest income

878

604

554

 

Share of income in an equity investee

-

-

77

 

Exchange gains

23

33

29

 

Change in fair value of warrant liabilities

-

-

842

Income from operations before income taxes

45,213

18,322

13,238

 

 

 

 

 

 

Income taxes

(13,399)

(6,661)

(3,620)

 

 

 

 

 

Net income

31,814

11,661

9,618

 

Less: net income attributable to non-controlling interest  

639

13

-

 

Net income attributable to shareholders

31,175

11,648

9,618

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 Basic

0.20

0.08

0.06

 

 Diluted

0.20

0.08

0.06

 

Shares used in computation:

 

 

 

 

 Basic

153,162

153,228

152,087

 

 Diluted

153,162

153,228

152,129

 

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,

2011

2010

(unaudited)

(unaudited)

Revenue

274,466

205,198

Cost of revenue

(194,906)

(160,330)

Gross profit

79,560

44,868

Selling expenses

(5,791)

(4,925)

General and administrative expenses

(11,772)

(11,405)

Operating income

61,997

28,538

Interest income

1,482

1,204

Share of income in an equity investee

-

639

Exchange gains

56

49

Change in fair value of warrant liabilities

-

842

Income from operations before income taxes

63,535

31,272

Income taxes

(20,060)

(9,754)

Net income

43,475

21,518

Less: net income attributable to non-controlling interest

652

-

Net income attributable to shareholders

42,823

21,518

Earnings per share:

 Basic

0.28

0.14

 Diluted

0.28

0.14

Shares used in computation:

 Basic

153,195

151,803

 Diluted

153,195

157,487

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,

2011

2011

2010

(unaudited)

(unaudited)

(audited)

ASSETS

Current assets

Cash and cash equivalents

270,262

247,072

213,326

Restricted cash

136,594

101,521

82,305

Accounts receivable

4,912

5,562

3,511

Other receivables

8,666

8,956

6,462

Other deposits and prepayments

63,669

41,303

34,790

Advances to suppliers

16,910

32,946

21,933

Real estate property development completed

6,809

10,426

1,470

Real estate property under development

695,074

669,132

710,585

Other current assets

542

595

663

Total current assets

1,203,438

1,117,513

1,075,045

Real estate properties held for lease, net

20,129

19,755

19,876

Property and equipment, net

2,254

2,598

2,687

Other long-term investment

242

242

242

Deferred tax asset

1,186

1,471

1,925

Other assets

3,528

3,753

4,190

TOTAL ASSETS

1,230,777

1,145,332

1,103,965

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,

2011

2011

2010

(unaudited)

(unaudited)

(audited)

LIABILITIES AND

SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

170,707

131,541

150,670

Short-term bank loans

181,729

208,587

186,631

Customer deposits

44,948

38,820

22,789

Income tax payable

36,815

39,530

40,895

Deferred tax liabilities

34,795

22,333

18,731

Other payables and accrued liabilities

43,638

39,733

39,162

Payroll and welfare payable

2,313

1,616

4,539

Current portion of long-term debt

296

1,891

331

Total current liabilities

515,241

484,051

463,748

Non- current liabilities

Long-term bank loans

96,789

74,107

70,213

Unrecognized tax benefits

13,460

13,272

13,151

Other long-term debt

39,194

38,939

38,688

TOTAL LIABILITIES

664,684

610,369

585,800

Shareholders' equity

Common shares

15

15

15

Treasury shares

(1,260)

-

-

Additional paid-in capital

509,007

508,489

507,973

Retained earnings (accumulated deficit)

29,737

(1,483)

(17,749)

Statutory reserves

27,559

27,559

27,559

TOTAL SHAREHOLDERS' EQUITY

565,058

534,580

517,798

Non-controlling interest

1,035

383

367

TOTAL EQUITY

566,093

534,963

518,165

TOTAL LIABILITIES AND

SHAREHOLDERS' EQUITY

1,230,777

1,145,332

1,103,965

SOURCE Xinyuan Real Estate Co., Ltd.



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http://www.xyre.com