Xinyuan Real Estate Co., Ltd. Announces First Quarter 2012 Financial Results

BEIJING, May 9, 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 first quarter of 2012.

Highlights for the First Quarter 2012

• Total first quarter revenues were US$172.6 million, an 88.0% increase from US$91.8 million reported in the first quarter of 2011, and a 13.6% decrease from US$199.8 million recorded in the fourth quarter of 2011.
• Contract sales totaled US$159.7 million, a 63.0% increase from US$98.0 million recorded in the first quarter of 2011, and a 7.2% decrease from US$172.1 million recorded in the fourth quarter of 2011.
• Total gross floor area ("GFA") sales were 114,600 square meters, a 40.4% increase from 81,600 square meters sold in the first quarter of 2011 and a 2.4% increase from 111,900 square meters sold in the fourth quarter of 2011.
• Selling, General, and Administrative ("SG&A") expenses as a percent of total revenue totaled 6.9% compared to 8.1% in the first quarter of 2011 and 5.8% in the fourth quarter of 2011.
• Net income reached US$23.2million, a 98.3% increase from US$11.7 million reported in the first quarter of 2011 and an 18.0% decrease from US$28.3 million in the fourth quarter of 2011.
• Diluted net earnings per American Depositary Share ("ADS") attributable to shareholders were US$0.31, equivalent to US$0.15 per common share, compared to diluted net earnings per ADS of US$0.16, equivalent to US$0.08 per common share, in the first quarter of 2011 and US$0.38 per ADS, equivalent to US$0.19 per common share, in the fourth quarter of 2011.
• Cash and cash equivalents, including restricted cash, increased by US$28.1 million to US$515.7 million as of March 31, 2012 from US$487.6 million as of December 31, 2011. Short and long term debt decreased by US$2.8 million to US$282.7 million compared to US$285.5 million as of December 31, 2011.
• On April 18, 2012 the Company announced a quarterly dividend of US$0.04 per ADS (US$0.02 per share) to shareholders of record on April 30, 2012 payable on May 15, 2012.

Mr. Yong Zhang, Xinyuan's Chairman and Chief Executive Officer said, "We were pleased to experience a strong contract sales growth in February and March versus a very weak January. As a result, we exceeded our contract sales, revenue and net income guidance ranges for the first quarter. Our contract sales results reflect the impact of selective discounting within certain development projects and indicate that our development projects in Tier II & III cities continue to be better insulated from restrictive government policies than projects in Tier I cities. Ten development projects were active in the first quarter with total GFA sales of nearly 115,000 square meters.

"Looking ahead, and assuming there will be no easing of government-implemented buyer restriction policies, we expect contract sales to show moderate growth over prior 2012 financial projections with selective discounting continuing through the end of the year.

"We were also pleased to announce the implementation of a US$0.04 per ADS quarterly dividend. Our annual payout of US$0.16 per ADS is 60% higher than the prior year period. We continue to seek attractive land acquisitions at reasonable prices and to maximize shareholder returns through our quarterly dividend payments and share repurchase program. With a highly diversified project pipeline and strong balance sheet, we remain highly confident in our strategy to offer affordable developments in Tier II & III cities."

Financial Results for the First Quarter 2012

Contract Sales

Contract sales totaled US$159.7 million in the first quarter compared to US$98.0 million in the first quarter of 2011 and US$172.1 million in the fourth quarter of 2011. The Company's GFA sales were 114,600 square meters in the first quarter of 2012 versus 81,600 square meters in the first quarter of 2011 and 111,900 square meters in the fourth quarter of 2011. The average selling price per square meter sold was RMB8,787 (US$1,393) in the first quarter of 2012 versus RMB7,908 (US$1,201) in the first quarter of 2011 and RMB9,940 (US$1,538) in the fourth quarter of 2011. The sequential ASP decline is attributed to sales of high-priced retail space in the previous quarter not continuing in the first quarter and to selectively discounting of certain residential properties as planned.

Breakdown of GFA Sales and ASP's by Project

The negative GFA sales for the Company's Kunshan project in the table above reflects the Q1 2012 cancellation by mutual agreement of 137 apartment contracts  totaling US$19 million dating back to 2010 when government policy restrictions rendered many buyers ineligible for mortgages. In 2010 the Company recognized total sales reversals of US$42.8 million from 348 apartments where the Company took the position that contracts not clearly executable under prevailing government policies should not be recognized as revenue under the percentage of completion method. Thus, these Q1 2012 Kunshan contract cancellations do not impact revenue under the percentage of completion method. As of the end of the first quarter of 2012, 190 unrecognized contracts with a total value of US$25.4 million remain outstanding.

Revenue under the Percentage of Completion Method

In the first quarter of 2012, the Company's total revenue using the percentage of completion method was US$172.6 million compared to US$91.8 million in the first quarter of 2011 and US$199.8 million in the fourth quarter of 2011.

Gross Profit

Gross profit for the first quarter of 2012 was US$49.2 million, or 28.5% of revenue, compared to gross profit of US$25.1 million, or 27.3% of revenue, in the first quarter of 2011 and a gross profit of US$56.4 million, or 28.2% of revenue, in the fourth quarter of 2011.

Each quarter the Company revises total project cost and sales projections for all projects. In the first quarter of 2012 US$1.0 million of cumulative gross profit was recognized under the percentage of completion method due to changes in estimates compared to US$0.8 million being recognized the previous quarter due to changes in estimates.

Selling, General and Administrative Expenses

SG&A expenses were US$12.0 million for the first quarter of 2012 compared to US$7.4 million for the first quarter of 2011 and US$11.7 million for the fourth quarter of 2011. As a percentage of total revenue, SG&A expenses were 6.9% compared to 8.1% in the first quarter of 2011 and 5.8% in the fourth quarter of 2011. The sequential increase in SG&A expenses was partly due to increased legal and consulting expenses in the project search and evaluation process for residential projects in the United States.

Share-based Compensation

Share-based compensation was US$0.1 million for the first quarter of 2012 compared to US$0.5 million for the first quarter of 2011 and US$0.2 million for the fourth quarter of 2011.

Net Income

Net income for the first quarter of 2012 was US$23.2 million compared to US$11.7 million for the same period in 2011 and US$28.3 million in the fourth quarter of 2011. Net margin was 13.5 %, compared to 12.7% in the first quarter of 2011 and 14.2% in the fourth quarter of 2011. Diluted earnings per ADS were US$0.31, equivalent to US$0.15 per common share, compared to a profit of US$0.16 per ADS, equivalent to US$0.08 per common share for the same period in 2011, and US$0.38 per ADS, equivalent to US$0.19 per common share, in the fourth quarter of 2011.

Balance Sheet

As of March 31, 2012, the Company reported US$515.7 million in cash and cash equivalents (including restricted cash) compared to US$487.6 million as of December 31, 2011. Total debt outstanding was US$282.7 million, a decrease of US$2.8 million compared to US$285.5 million at the end of the fourth quarter of 2011. The value of the Company's real estate property under development at the end of the first quarter was US$705.3 million compared to US$761.9 million at the end of the fourth quarter of 2011.

Project Status

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

As of March 31, 2012, the Company's total sellable GFA was approximately 1,403,200 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:

Second Quarter and Full Year 2012 Outlook

The Company expects contract sales in the second quarter of 2012 to be in the range of US$190 to US$200 million. Revenue under the percentage of completion method is expected to range between US$210 and US$220 million and net income in the second quarter is expected to be in the range of US$27.0 to US$30.0 million.

For the full year 2012, contract sales are expected to be in the range of US$660 to US$680 million. Revenue under the percentage of completion method is expected to range between US$760 and US$780 million and net income is expected to be in the range of US$97 to US$107 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 May 9th, 2012 at 8:00 a.m. U.S. Eastern Time. Listeners may access the call by dialing 1-719-457-2660. 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: 1737491

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 May 9, 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: [email protected]

Ms. Helen Zhang

Financial Controller
Tel: +86 (10) 8588-9255
Email: [email protected]

ICR, LLC

In U.S.: +1-646-308-1472
In China: +86 (10) 6583-7511
Email: [email protected]

SOURCE Xinyuan Real Estate Co., Ltd.