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Property giant China Evergrande Group has said that it cannot sell properties and other assets fast enough to service its massive $300bn debts, and that its cashflow was under “tremendous pressure”.
Only hours after angry investors besieged its Shenzhen headquarters and the company denied it was set for bankruptcy, Evergrande issued a statement to the Hong Kong stock exchange saying that a significant drop in sales would continue this month, which was likely to further deteriorate its liquidity and cash flow.
The company blamed “ongoing negative media reports” for dampening investor confidence, resulting in a further decline in sales in September – usually a strong month for sales in China.
Evergrande also said two of its subsidiaries had failed to discharge guarantee obligations for 934m yuan ($145m) worth of wealth management products issued by third parties. That could “lead to cross-default”, it said.
And in a sign that restructuring plans are speeding up, the board also said it had appointed advisers to “assess the group’s capital structure, evaluate the liquidity of the group and explore all feasible solutions to ease the current liquidity issue”.
Shares in the group closed down nearly 12% in Hong Kong on Tuesday.
The statement also said it had failed to find a buyer in the distressed sale of its electric vehicle and property service subsidiaries, prompting shares in those businesses to fall by 25% and 12% respectively.
Evergrande is one of the world’s most indebted companies, and has seen its shares tumble 75% this year, sparking fears among analysts of “a risk of contagion” spreading through China’s overheated property sector and also its banking system….
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The world’s oil demand fell for a third consecutive month in August following an increase in Covid-19 cases in Asia, but a sharp rebound could follow in the final months of the year, according to the International Energy Agency (IEA).
Our energy correspondent Jillian Ambrose explains:
The global energy watchdog revised down its oil demand forecasts for the third quarter by 200,000 barrels a day after China put in new measures to curb travel by a third in a bid to stem the latest outbreak of Covid-19.
“Global oil demand remains under pressure from the virulent Covid-19 Delta variant in key consuming areas, especially parts of Asia,” the Paris-based agency said in its latest monthly oil market report.
The IEA said that despite the weak demand over recent months oil demand is expected to rebound in October as Asia’s energy-hungry economies begin to reopen with help from falling Covid-19 case numbers, progress in vaccine manufacturing and less restrictive social distancing measures.
The report said:
“Already signs are emerging of COVID cases abating with demand now expected to rebound by a sharp 1.6 million barrels per day (bpd) in October, and continuing to grow until end-year.”
The slowdown has caused the IEA to trim its oil growth forecasts for the year by 105,000 barrels of oil a day, but raise its estimate for 2022 by 85,000 barrels a day to 3.2m barrels a day.
Global oil consumption is expected to average 99.1m barrels of oil a day this year, around 4.7m barrels of oil a day higher than last year but still 1.1m barrels a day lower than in 2019.
Despite the oil market slowdown over the summer months global market prices have continued to rise, reaching a six week high of $73.51 a barrel earlier this week as US oil productions remains slow to return to full strength two weeks after Hurricane Ida wreaked havoc along the oil-rich Gulf Coast.
Further disruptions are expected from bad weather this week as Tropical Storm Nicholas has forced Royal Dutch Shell to evacuate staff from a Gulf of Mexico oil platform, and other companies have prepared for rain and hurricane-force winds.
The unplanned US outages have offset the increase in supply from the Organisation of Petroleum Exporting Countries (Opec) and its allies, leading the world’s total oil supply to fall by 540,000 barrels of oil a day last month.
Supermarket prices have risen 1.3% this month, marking a significant increase in grocery price inflation as shoppers are affected by supply chain difficulties — such as the record job vacancies seen this summer.
Price rises were most significant in savoury snacks, cat food and packaged cakes and pastries according to analysts at Kantar, who said that the pace of inflation in September had more than tripled from just 0.4% in August, which was the first month of price rises since April.
The figures come after multiple forecasts from business leaders of an autumn rise in living costs ignited by Covid and Brexit disruption, including a shortage of delivery drivers.
Consumer goods makers such as Nestlé, Procter & Gamble and Unilever have said they will be forced to increase their prices and retailers predict the cost of filling up a trolley will climb further if disruption continues.
Fraser McKevitt, the head of retail and consumer insight at Kantar, said:
“For much of 2021 shoppers have been shielded from price increases, with more being sold on promotion this year compared to 2020. But in the past month only 27.5% of spending was done on deals.
Other than the early days of lockdown last year, that is the lowest level recorded in the 15 years which we have tracked this data.”
In the City, shares in online grocery technology firm Ocado have fallen over 2% after it revealed that the fire at its warehouse in south-east London in July will leave it with a £10m loss.
Ocado also warned it expects to spend up to £5m hiring and paying delivery drivers amid a nationwide shortage — a timely example of the UK’s job vacancies.
The blaze at the facility in Erith caused by the collision of three robots, the online supermarket’s third in three years, resulted in 300,000 orders, or about £35m of revenue, being lost.
Ocado said the business disruption cost it £10m, plus another £10m for stock and other write-offs. The resulting net cost, not covered by insurance, is estimated to be £10m, which will drag down profits for the current year.
Ocado also faces a bill of up to £5m this year because of the rising cost of large goods vehicle and delivery drivers. A surge in online shopping during the pandemic coupled with a national driver shortage caused by Brexit has forced Ocado, and other supermarket groups, to raise hourly rates and offer signing-on bonuses.
Employers scrambling to hire staff amid widespread labour shortages after lockdown helped to return the number of workers on company payrolls to pre-pandemic levels in August, official figures show.
The Office for National Statistics said the number of payroll employees increased by 241,000 to 29.1m in August, lifting employment in all regions of the UK to pre-Covid levels except in London, Scotland and south-east England.
It came as the number of job vacancies soared to more than 1m in August for the first time since official records began, rising by 35% in the space of three months across all sectors of the British economy.
Reflecting difficulty hiring staff after lockdown for a wide range of businesses across Britain, the ONS said the largest increase was in accommodation and food services – the sector which includes hotels, pubs and restaurants – with a 75% increase over the past three months.
Despite the rise in the number of payrolled employees in August, which is collected from HMRC data, the ONS said employment in the UK still remained below pre-Covid levels in official data gathered in its labour force survey in the three months to July.
Unemployment was estimated at 4.6%, a drop of 0.3 percentage points on the previous quarter but still 0.6 percentage points higher than before the pandemic struck.
Employment, which measures the proportion of people aged 16 to 64 in work, rose steadily to 75.2% in the three months to the end of July, but remains 1.3 percentage points lower than pre-Covid levels.