(Yicai Global) April 1 -- R&F Properties fell into the red last year because of a huge inventory impairment provision and lower sales, but the debt-ridden Chinese developer said it would continue to sell assets to pay off debt this year.

The net loss was CNY8.74 billion (USD1.38 billion) in the year ended Dec. 31, the Guangzhou-based firm’s annual earnings report showed yesterday. That compared with a net profit of more than CNY9 billion the year before.

Contracted sales fell 13 percent to CNY120.2 billion in 2021, while revenue dropped 11 percent to CNY76.4 billion. Under China’s accounting regime, R&F’s sales for the year cannot be recorded in the same year’s operating income, which is why sales figures do not necessarily match those for revenue.

The developer sold each square meter of property for CNY8,300 (USD1306) on average, down from CNY8,600 in 2020. That slashed its gross profit margin to 14.1 percent from 25.2 percent in 2020 and led to an inventory impairment provision of CNY8.1 billion.

R&F’s total borrowing fell to CNY132.7 billion at the end of last year, down about 33 percent from 2019. Its net debt ratio shrank to 123 percent from 199 percent in 2019.

The firm has been trying to organize a debt extension, and according to a previous announcement, a USD725 million debt that fell due in January has been extended.

Shares of R&F Properties [HKG: 2777] ended 3.6 percent higher in Hong Kong today at HKD2.80 (36 US cents) each.

According to a report by China Lianhe Credit Rating late last year, R&F has about CNY8.07 billion of domestic bonds, CNY1.4 billion of domestic put provision bonds and USD1.37 billion in offshore notes coming due this year.

To deal with that, R&F said it will sell overseas non-core assets this year. As market prices begin to return to normal and the gap between buyer and seller expectations narrows, R&F said it expects to sell more assets in 2022 to provide additional funds.

It sold a project in London for USD124.8 million last month, which it said was divested at a discount of about 42 percent compared with the market value.

R&F said pre-sales did not recover in the first quarter, but it expects to perform better in the second half. With 200 pre-selling projects, the estimated saleable value is CNY220 billion. The company did not provide more forecasts.

Earlier data from real estate agency China Residence Information Circle showed that R&F had contracted sales of about CNY11 billion in the first quarter of this year, down more than 60 percent from a year earlier.

Editor: Tom Litting