Vanke held the 2023 annual performance promotion meeting online today. Zhu Jiusheng, president and CEO of Vanke Group, said at the meeting that, on the whole, the company still maintained and held the safety bottom line under the background of deep adjustment of the industry. Although the pressure on some short-term indicators, such as cash in hand and short-term debt ratio, has increased, these challenges are staged, and the company has made positive responses and received strong support from Shenzhen state-owned assets, major shareholders and financial institutions. Vanke has the confidence and ability to meet the current challenges.
Zhu Jiusheng also said that Shenzhen Metro, Vanke’s major shareholder, is about to complete substantial support of tens of billions, and the new sources of funds are sufficient, and the original gap will certainly be made up.
Zhu Jiusheng talks about financing pressure
When talking about the financing status, Zhu Jiusheng said that the current financing status of Vanke is still normal, objectively speaking, there is pressure, but Vanke will certainly be able to make it through. He personally feels that this challenge related to financing has three aspects: first, the challenge brought by the imbalance of development business income and expenditure; The second is the challenge brought by the change of financing mode. In the past, it was possible to withdraw money at a large amount, but now it is necessary to transfer to the project and withdraw money according to the progress of the project; The third challenge is the layout of the whole business, that is, the rate of return of the business is not enough to cover the whole state of interest climbing.
When talking about the financing plan, Zhu Jiusheng said that God closed a door of Vanke, and in the past, it was always the total credit financing. But it also opened two windows for Vanke. One of them is the real estate financing coordination mechanism, commonly known as the project white list. Vanke has selected more than 30 projects into the white list, and the list is still being reported. In addition, Vanke is also concerned about operating property loans. Vanke’s operating property loans increased by about 10 billion in the first three months of this year. Vanke is rich in resources and sufficient in assets for operating property loans. In the future, operating property loans will flourish.
Zhu Jiusheng talks about cooperation with institutions
Regarding the cooperation with banks, Zhu Jiusheng said that Vanke has long been a good strategic and long-term cooperative relationship with banks. Vanke has 8 short-list cooperative banks, 16 long-list cooperative banks and 26 long-term cooperative banks, which have long supported Vanke. When the industry’s downward sales decline and the return is reduced, banks are Vanke’s allies in risk prevention. He also said that before the bank loan, it was always a total credit loan, and the change of regulatory policy must turn to the project system. The mortgage model turned around overnight, with a conversion period of 1-3 years. Zhu Jiusheng mentioned that banks are concerned about three issues: where the first money flows, where the second asset items are, and whether the third cash flow and the value of goods are enough. These three questions are well answered, and the bank is definitely supportive.
Regarding the cooperation with insurance funds, Zhu Jiusheng said that Vanke has cooperated with many insurance companies, and the insurance funds support the company in the form of "5+1+1+…" in terms of term setting. Sometimes the choice of "+"is in the insurance funds, and sometimes in Vanke, when it is close to "+",the two sides will sit down and talk. I am especially grateful to the major insurance companies for their long-term support to the company. Long-term patient funds have made Vanke more calm and resilient in its business operations. The support of insurance funds makes the company more determined on the road of transformation.
Yu Liang: The market is obviously oversold in the short term.
Regarding the future trend of the industry, Yu Liang, Chairman of Vanke’s Board of Directors, said that it is difficult for the industry to return to the past high point, but the prospect is still broad, and the view of "oversold market" has not changed. Yu Liang pointed out that we should look at the changes in the market from a dynamic perspective. He mentioned two aspects. One is that the housing demand still exists, and the other is that the urbanization process in China is not over. He predicted that the future housing demand construction will be maintained at around 1 billion square meters, which is a relatively certain value. However, in the past year, the construction area of newly started houses in China was less than 700 million square meters, which was 59% lower than the high point in 2019. Therefore, from this point of view, Yu Liang thought that the market should be oversold, and his views on the market remained the same as before.
Regarding the focus of the company’s work in 2024, Zhu Jiusheng said that in 2024, the company should ensure a safe bottom line, and hope that the development business will persist in outperforming the general trend, the cash flow at the operational level will be positive, and the work of block trading and equity trading will be strengthened, and the return will reach more than 30 billion yuan. At the same time, Zhu Jiusheng proposed that the company will still firmly reduce leverage, promote the transformation of financing model, reduce interest-bearing debt by 100 billion yuan in the next two years, actively use financing tools such as operating property loans, fully integrate into the urban real estate financing coordination mechanism, and promote the transformation of financing model. The company will also promote the streamlining and high efficiency of the organization, maintain the stability of key employees, support business development, scrimp and save, and reduce management costs.
Regarding the downgrade of the company’s rating, Zhu Jiusheng said that the rating of Vanke by major rating companies has indeed been downgraded, but there has been no fundamental change in the company’s fundamentals. The downgrade is certainly influential, but it has no major fundamental impact. At present, it seems that the impact is relatively limited.
As for asset trading, Liu Xiao, executive vice president and chief operating officer of Vanke Group, said that in the future, the company will continue to promote the business model from heavy to light, and asset trading is an important path for the business from heavy to light and continuously improve its operating level. Therefore, the scale of asset trading of Vanke in 2024 will be larger than that in 2023. It is reported that the transaction amount of Vanke’s assets in 2023 was 12.3 billion yuan.
No dividends for the first time since listing.
As for the company’s dividend, according to Vanke’s 2023 annual report, no dividend will be distributed in that year, which is the first time that Vanke has not paid dividends since its listing. Zhu Xu, secretary of Vanke’s board of directors, responded that Vanke has always attached great importance to cash dividends to give back to shareholders, with a total dividend of 103 billion yuan for 31 consecutive years, with a historical average dividend rate of 33.3%, which is also 2.8 times that of Vanke’s equity financing over the years, which is what the company has always been proud of. Based on this background, it is really difficult for the board of directors to consider canceling the dividend in 2023.
Zhu Xu said that the current industry is still undergoing deep adjustment. In January and February, the sales performance of the top 100 real estate enterprises fell by more than 50%, and the sales of Vanke fell by more than 40%. The confidence of the whole market is still recovering, and the uncertainty of operation still exists. Based on this, Vanke also made some communication with bond investors and equity investors in advance.
According to Zhu Xu, Vanke investors have some differences in dividends. For example, creditor investors hope that the company will not pay dividends or reduce dividends, and keep more cash reserves to cope with the repayment of future creditor’s rights; Equity investors are divided into two categories, one is understandable, hoping that the company will not pay dividends and keep more cash reserves to ensure safe operation, and the other is hoping that the company can continue its previous dividend policy. Based on the opinions of creditor investors and equity investors, the board of directors decided to cancel the dividend in 2023 based on very in-depth discussions, so as to help the company better cope with the uncertainty in a special period and ensure operational safety. I sincerely urge investors to give the company an understanding.
Yu Liang voluntarily reduced his salary to 10,000 yuan before tax every month.
On the evening of March 28th, Vanke Group released its 2023 annual performance announcement. Under the background of losses of many listed real estate companies, Vanke Group, as the head enterprise of the industry, has not been spared. The announcement shows that in 2023, Vanke Group’s operating income was 465.74 billion yuan, down 7.6% year-on-year; The net profit attributable to shareholders of listed companies was 12.16 billion yuan, a decrease of 10.53 billion yuan or 46.4% compared with 22.69 billion yuan in 2022.
In this context, the management of Vanke Group collectively chose to reduce salary in 2023: eight directors, supervisors and senior managers who worked full-time in Vanke Group voluntarily gave up their bonuses in 2023, and the pre-tax remuneration received from Vanke Group in 2023 totaled 7.661 million yuan; The pre-tax remuneration received by four independent directors from Vanke Group in 2023 totaled RMB 1.5 million.
So far, the total pre-tax remuneration of Vanke Group management in 2023 has dropped to 9.16 million yuan, a decrease of 73.6% compared with 34.66 million yuan in 2022.
In addition, since the disclosure of the report, Chairman Yu Liang of the Board of Directors, President Zhu Jiusheng and Chairman of the Board of Supervisors have voluntarily received a monthly salary of 10,000 yuan before tax. It is worth noting that this is not the first time that the management of Vanke Group has reduced its salary. In 2021, the net profit of Vanke Group’s parent company dropped from 41.5 billion yuan to 22.5 billion yuan, a decrease of 46%. Vanke faced the third profit decline in the past 30 years. Yu Liang voluntarily gave up all his bonuses in 2021 and received a pre-tax salary of 1.547 million yuan that year. Two years later, in 2023, Yu Liang’s salary in Vanke Group dropped to 1.27 million yuan again, with a monthly salary of about 100,000 yuan.
