Xinyuan Real Estate Co., Ltd. (NYSE:XIN) Q4 2019 Earnings Conference Call - Final Transcript

Apr 03, 2020 • 08:00 am ET

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Xinyuan Real Estate Co., Ltd. (NYSE:XIN) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] And we will take our first question from George Guo [Phonetic] who is a private investor.

Analyst
George Guo

Hi. The first question is how much impact from the leasing cost in Hong Kong to this quarter.

Executive
Yong Zhang

The leasing cost, there are two components to it. One component is coming from the share-based compensation due [Phonetic] for this leasing process and the number is about, give me a sec -- the impact is about $1.7 million stock-based amortization -- compensation. And the other component obviously is about the leasing cost. The leasing cost is about -- is about $3 million.

Analyst
George Guo

Okay. Thank you. Second question is, I know it is a large increase in cash position. How did you achieve that?

Executive
Yong Zhang

So the other increase of the position on one hand is coming from the positive cash flow we had in the Q4. For the -- to come to the exact amount, let me pull out the information, in Q4 our cash -- we had about $457 million coming in -- the positive cash coming in for the quarter. That is the main reason. And at the same time, some of the gross inflow also coming from the financing activity. We to meet the debt deal in the quarter we as a factory [Phonetic] raised about RMB4.4 billion of debt even though the net cash provided by the financing is actually negative $53 million debt financing held. Overall the cash increase in fourth quarter is $414 million.

Analyst
George Guo

Okay. Last question for me is can you clarify how it impacts the gross margin? You said that you took some charges. Can you explain that again?

Executive
Yong Zhang

Sure. In this quarter we used even more conservative approach to look at all of our projects, profitability and overall cost. Bear in mind that we used the POT method to recognize our revenue and cost. So the POT [Phonetic] recognition is pending on our estimate for the overall projects of our revenue and the costs. So this quarter we looked at maybe three of the projects that we significantly reduced our sales estimate and at the same time we had two projects that we increased the estimate of the overall target costs. And so because of this very conservative approach, the gross margin was reduced or adjusted by $62 million. So this one-off impact, the year-to-date gross margin was reduced by 25% on the underlying operation to about 23% and quarter to date, our gross margin ratio was reduced by 22% to 23% in the underlying operation to around 15% on the book.

Analyst
George Guo

Okay. Thank you very much.

Executive
Yong Zhang

Going onwards we will continue to use a very conservative approach to do this. I expect the impact won't be as big as this one because this adjustment [Indecipherable] in the historical accumulated adjustment for the last two to three years.

Analyst
George Guo

Okay. Thank you. Very good cash management. Thank you.

Executive
Yong Zhang

Thanks.

Operator
Operator

[Operator Instructions] And we will take our next question from Franklin Martin [Phonetic] who is a