China's third-largest property developer has reported its first profit decline since 2016. China Evergrande released its first-half earnings report on Wednesday this week, revealing a disappointing 45 percent drop in its core profits for the first six months of 2019.
The release of the report has made China Evergrande the first of the country's top 10 developers to report an earnings decline.
The drop in the company's profits has mostly been attributed to the recent rollout of new measures by the central government, which was aimed at curbing property price growth.
China Evergrande's interim core profits came in at $4.2 billion, while its first-half revenues came in at 31.74 billion. The company's revenues fell by 24.4 percent when compared to the same period last year.
From January to June, China Evergrande was only able to make total sales of $39.41 billion, the amount is less than half of the company's annual sales target. The company also reported a 7.4 percent drop in overall contracted sales for the first half of the year.
According to the vice-chairman and current president of Evergrande Chian, Xia Haijun, the recent rollout of cooling measures by the central government may initially bring down nationwide home prices, but it will eventually prove to stabilize the housing market amid the ongoing trade dispute with the United States.
The entire property sector, including its supply chain, account for around 25 percent of China's total gross domestic product (GDP) output. The central government's newly imposed measures are aimed at stabilizing the sector by preventing a runaway increase in home prices.
Xia explained that Evergrande was prepared to become the "model student" and follow the government's lead in the housing sector. This is apparently the very reason why it has been cutting prices to increase its overall sales, even if it will only serve to weigh down on the country's already sluggish economy.
The company's head admitted that the country's market had already reached its peak last year. He explained that the only way for developers to remain competitive is to try to grab a larger market share.
The current top three developers in the country currently hold around 13 percent of the market. Xia aims to increase Evergrande's market share through a number of new campaigns for its various projects.
This month, the company launched a nationwide campaign that cut its property prices, offering customers large discounts of as much as 22 percent in some of its 532 active projects around China.
