Bill Zima- ICR Yong Zhang - Chairman George Liu - CFO

Good day everyone, and welcome to the Xinyuan Real Estate Company Limited Second Quarter 2016 Earnings Conference Call. Please note that today’s call is being recorded. I would now like to turn the conference over to Mr. Bill Zima of ICR. Please go ahead, sir.

Hello, everyone, and welcome to Xinyuan’s second quarter 2016 earnings conference call. The company’s second quarter earnings results were released earlier today and are available on the company’s IR website as well as on Newswire services. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results will be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our registration statement and our Form 20-F and other documents filed with the US Securities and Exchange Commission. Xinyuan does not assume any obligation to update any forward-looking statements, except as required under applicable law. Today you will hear from Mr. Yong Zhang, the company’s Chairman, who will comment on our operating results. He will be followed by Mr. George Liu, the company’s Chief Financial Officer, who will provide some additional color on Xinyuan’s performance, review the company’s financial results, and discuss the financial outlook. Following management’s prepared remarks, we will open up the call to questions. During the Q&A session, Mr. Zhang will speak in Mandarin and his comments will be translated into English. With that said, I would now like to turn the call over to Xinyuan’s Chairman, Mr. Zhang. Please go ahead.

Thank you, Bill. Good morning and thank you all for joining our second quarter 2016 earnings conference call. We’re pleased to deliver stronger financial results for the second quarter of 2016, with both contract sales up 42.8% and GFA sales up [57.6%] and net income up 37.6% compared with the same quarter of last year, as we continue to benefit from variable market conditions. Our sales activity remains healthy and active at most of our projects. We were also pleased to complete our third land acquisition in the New York City recently. Additionally, the company’s property management was awarded and ranked number 14 among the top 100 property management companies in China by the National Property Management Association in 2016. Revenue development is expected to constitute to our future growth. Finally, we are pleased to significantly reach our four year financial forecast. We also purchased shares in the second quarter on top of our quarterly dividend payment this quarter to maximize value for shareholders. Now, please allow me to turn the call to our CFO, Mr. George Liu. George, please go ahead.

Thank you, Chairman. Hello everyone, and welcome to Xinyuan’s second quarter 2016 earnings conference call. We’re very pleased with the strong financial performance for the second quarter and continue to make good progress on the execution of our growth strategy. During the second quarter, Xinyuan continued to benefit from healthy market conditions in China’s real estate sector. Our sales also benefited from our choice of projects in the Tier 1 and 2 cities that have favorable economy and population growth trends, and where we have an existing presence and good track record of performance. Now please allow me to further review our financial results for the second quarter of 2016. Contract sales increased 42.8% to US$474.4 million from US$332.3 million in the second quarter of 2015, an increased 69.7% from $279.6 million in the first quarter of 2016. Total gross floor area sales increased by 57.6% to 344.600 square meters from 218,700 square meters sold in the second quarter of 2015, and increased 56.8% from 206,600 square meters sold in the first quarter of 2016. The average selling price per square meter sold was RMB8,992 or $1,377 in the second quarter of 2016, compared to RMB9,309 or $1,519 in the second quarter of 2015, and RMB8,839 or $1,354 in the first quarter of 2016. Total revenue increased by 36.9% to $376.6 million from 275.1 million in the second quarter of 2015 and increased 60% from $235.4 million in the first quarter of 2016. Gross profit was $77.3 million or 20.5% of revenue, compared to a gross profit of 60.9 million or 22.2% of revenue in the second quarter of 2015 and a gross profit of $48.9 million or 20.8% of revenue in the first quarter 2016. SG&A expenses were $41 million compared to $35.8 million for the second quarter of 2015, and $31.5 million for the first quarter of 2016. As a percentage of total revenue, SG&A expenses decreased to 10.9% compared to 13% in the second quarter of 2015, and 13.4% in the first quarter of 2016. Net income increased 37.6% to $27.8 million, compared to $20.2 million for the second quarter of 2015, and increased 302.9% from $6.9 million in the first quarter of 2016. Diluted net earnings per ADS attributable to shareholders were $0.39 compared to $0.27 per ADS in the second quarter of 2015 and $0.09 per ADS in the first quarter of 2016. As of June 30, 2016 Xinyuan’s cash and cash equivalent included restricted cash decreased to $899 million from $1,028.6 billion as of March 31, 2016. Total debt outstanding decreased to $1.98 billion, a decrease of $170.7 million, compared to $2.15 billion at the end of the first quarter of 2016. The balance of our real estate property under development at the end of the second quarter of 2016 was $2.08 billion, compared to 2.04 billion at the end of the first quarter of 2016. During the second quarter of 2016, we continued to make progress in our Oosten project based in Brooklyn, New York. As of the end of the second quarter, the company had pre-sold approximately 73% of its total units, compared to 69% at the end of March 2016. Sales trends and prices remain healthy at our Oosten project. For our mixed-use project located in Mid-town Manhattan, our architectural engineering and marketing teams has already been assembled and are busy in the planning and design stages. It is important to note that in addition to developing residential condos, a portion of this project will include commercial and retail space, marking our [forceful] way in to the NYC retail real estate market. We are currently in close discussion with several major national retail chains about establishing a presence in our new building. We have recently submitted our official building permit application to the New York City Department of Buildings. Recently on August 01, we announced the successful acquisition of our third New York base land parcel in Flushing, Queens, with project plans for 269 modern condo references that includes amenities such as a 24 hour door man, gym, tenant lounge, 305 space parking garage, and landscaped courtyard, as well as a large ground-floor and second-floor retail space. The company expects to begin construction on this property as the company’s Oosten project construction comes to completion. We believe that this project will add substantial value to our project portfolio. During the second quarter of 2016, we repurchased 1,387,008 ADS at a total cost of approximately $7 million. Today, we also announced a 100% increase in quarterly dividend payment a doubling of our cash dividend payment for the second quarter of 2016. The increased payment of US$ 5 cents per common share, or US$ 10 cents per ADS, will be paid on September 8, 2016 to shareholders of record as of August 25, 2016. As we look ahead to the remaining half of 2016, we believe market conditions at our various development projects will remain strong. Therefore, we are raising our full year financial forecast. We now expect full year contract sales to grow approximately 30% and net income to grow approximately 50%, compared to 2015. Please note that our 2016 forecast also includes a partial contribution from our Oosten project in Brooklyn. This concludes my prepared remarks for todays’ call. Operator we are now ready to take on questions.

[Operator Instructions] And we’ll go first to Josh [Fayne], a private investor.

My question is regarding the interest on [future] bonds? Are there any plans to pre-pay those or are they going to remain on schedule and are you looking for better interest rates?

About interest rates, we do expect more favorable interest rates in the second half of this year.

(inaudible) financing.

Could you repeat your question pleas.

Sure. So you will be refinancing the bonds?

We are actually evaluating our options that we have, and we’ll announce it once a firm decision has been made.

[Operator Instructions] And we’ll go to [Brad Mayo], a private investor.

Just wanted to say congratulations on a fantastic quarter. Management’s doing an awesome job at executing on their strategy as a shareholder they increased dividend, continued buybacks and most importantly they’re improving balance sheet. It’s all good news and I actually don’t have any questions just congratulations on a very solid quarter and I’m very pleased with the results. Thank you.

And we’ll go to Josh Fayne, private investor.

Yes, I had one more question, will you guys be aggressively continuing the share repurchase?

The Board has approval to allow us to do share repurchase, now whether we will continue to do it in an aggressive way it really depends how the future will go.

Okay. But you will be continuing the buyback?

It is definitely an option that we will consider.

And there are no more questions in the queue at this time. I’d like to turn the conference back to the speakers for any additional or closing remarks.

If there’s no more questions, we thank you for joining us on today’s call, and appreciate your ongoing support. We would look forward to updating you on our program in the weeks and months ahead. Thank you again.

This does conclude today’s conference. We thank you for your participation. You may now disconnect.