China Evergrande Says Construction Has | Stock Market News Today


Troubled property developer

China Evergrande Group


EGRNF -10.55%

said construction work has resumed at more than 90% of its stalled residential projects, adding that it has picked up the pace of delivering apartments promised to home buyers across the country.

Evergrande,


EGRNF -10.55%

in a statement Sunday night, said more than 80% of its suppliers of materials and decorative services have “resumed cooperation,” and that it has signed thousands of new contracts with various suppliers. At the end of August, the developer disclosed that construction had been suspended at some projects after it fell behind on payments. And by October, hundreds of Evergrande’s unfinished developments were affected by work stoppages.

With just a few days to go before the end of 2021, Evergrande said it intends to deliver 39,000 homes in 115 projects to buyers across China in December. It compared that to its completion of fewer than 10,000 units in each of the preceding three months.

The world’s most indebted real-estate firm Evergrande has embarked on a social media campaign to show construction has resumed and says it’s doing whatever it takes to deliver homes. WSJ compares these posts with ones from upset buyers. Photo Composite: Emily Siu

In a post on social media Monday, Evergrande said apartment projects have been handed over in batches in 18 provinces and it released photos of completed buildings adorned with bright red decorations and people signing papers to take ownership of their homes.

Despite this, Evergrande still has many more commitments to fulfill and its debt crisis remains unresolved. The 25-year-old developer used to be one of the country’s largest by contracted sales and is on the hook to deliver units to more than one million people. Many buyers made large down payments on unfinished flats, expecting to take ownership of them in a few years.

Hui Ka Yan,

Evergrande’s founder and chairman, said that “under the care and guidance of governments at all levels,” as well as support from partners, financial institutions and other constituents, the developer has made progress in its commitments to homeowners.

He added that Evergrande would do whatever it takes to resume work and deliver homes and predicted that the firm will eventually be able to “resume sales, resume operations, and pay off debts.”

Hui Ka Yan, China Evergrande’s chairman, in Hong Kong in 2019.



Photo:

Paul Yeung/Bloomberg News

The company’s statement followed comments over the weekend from two Chinese regulators which said they would safeguard the rights of homeowners and keep the property sector stable. Beijing has been trying to prevent Evergrande’s debt crisis from hurting the many small businesses and ordinary citizens that the developer owes money and apartments to.

Wang Menghui,

head of China’s Ministry of Housing and Urban-Rural Development, said in an interview with the state-run Xinhua News Agency that the regulator will address the risks of some leading developers that fail to deliver projects on time, with the goal of “guaranteeing home deliveries, protecting people’s livelihoods and maintaining social stability.”

The People’s Bank of China separately said—as part of a wide-ranging statement on the economy—that it would protect the rights and interests of homeowners and promote the healthy development of the country’s real-estate market.

Evergrande, the world’s most indebted developer, has been struggling under the weight of roughly $300 billion in liabilities, including around $20 billion in international bonds. The developer has missed payment deadlines on some of its dollar bonds, setting the stage for a massive and complex restructuring. Major credit raters have declared it to be in default.

Earlier this month, the conglomerate sought help from the government of its home province, Guangdong. It has since set up a risk-management committee that includes representatives from several state-backed entities.

Evergrande recently said the committee is working to help contain its risks and will engage with its creditors. Some international bondholders, however, have said there has been little communication from the company so far, the Journal reported last week.

The company’s Hong Kong-listed shares have plunged in value this year to historic lows and its dollar bonds are trading at deeply distressed levels. Markets in Hong Kong were closed Monday for a public holiday.

Write to Anniek Bao at [email protected]

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Despite Lumber Boom, Few New Sawmills Coming | Sidnaz Blog


North America’s sawmills can’t keep up with demand, which has sent wood prices on a meteoric rise. Don’t expect new mills to start popping up though.

Executives in the cyclical business of sawing logs into lumber said they are content to rake in cash while lumber prices are sky-high and aren’t racing out to build new mills, which can cost hundreds of millions dollars and take two years to build from the ground up.

In doing so they are breaking with conventional wisdom in the commodities business, which states that the cure for high prices is high prices. Usually when prices for raw materials rise, refineries and smelters ramp up, farmers plant larger crops, wells are drilled, mines dug. New supplies flood into the market and prices retreat.

Home buyers and do-it-yourself-ers, who are paying more than four times the normal price for lumber, would like for that to happen. But they are flush thanks to historically low borrowing costs, rising home values and government stimulus. Demand has been unbowed by escalating prices.

Though lumber futures eased off last week’s all-time highs, they remain more than twice the pre-pandemic record. Meanwhile, cash prices for framing lumber and structural panels reached new highs, according to pricing service Random Lengths.

Mill companies including

Weyerhaeuser Co.

and

West Fraser Timber Co.

have set nine-figure budgets to boost efficiency and output at their existing mills, particularly in the South where there is a glut of cheap pine timber. Some forest-products executives said they are considering acquisitions with their fast-accumulating cash. But there aren’t many new mills on the drawing board for North America.

“We are going to be ultra cautious on what we do in those regards,”

Canfor Corp.

Chief Executive

Don Kayne

told investors last month when the company reported record quarterly profits. “We don’t mind at all having a little extra cash around for sure, considering what this industry goes through.”

U.S. lumber-making capacity has risen about 11% over the past five years, according to Forest Economic Advisors LLC. New mills in the pine belt between Georgia and east Texas have helped offset closures that have shrunk Canada’s capacity, but there isn’t much coming behind them. Idled facilities are restarting in Florida and Mississippi. A couple small mills are under construction out West. Four bigger mills have been announced but not begun in the South, the firm said.

Chad Hesters,

who advises forest-product executives and investors as managing partner in the Houston office of consulting firm

Korn Ferry,

said the lumber boom has prompted clients to ask about building mills. He said he tells them they are too late.

Besides the time and money it takes to build a modern mill, equipment, from microprocessors to heavy machinery, is in short supply. So are the sort of workers needed to operate a computerized mill, especially in the rural places where timber is abundant, Mr. Hesters said.

“Trying to build capacity and make investments that have a lot of lead time at the top of a cycle is historically a good way to lose money,” Mr. Hesters said.

U.S. wood-product manufacturing peaked in January 2006, according to the Federal Reserve. A sharp decline that year foreshadowed the housing market’s collapse. The least efficient mills shut down while others were consolidated. Big Canadian sawyers West Fraser, Canfor and

Interfor Corp.

have spent billions of dollars modernizing mills in the Southern pinelands ever since.

Companies that buy wood from mills have been limiting orders for fear of getting stuck with inventory. A truss manufacturer in Spanish Fork, Utah, last week.



Photo:

George Frey/Getty Images

An example is in Summerville, S.C., where Interfor is boosting output at a lumber mill that it bought in March from a cardboard maker. The lumber boom has pushed up asking prices for mills, though, which may impede deals like that, forest-product executives said.

Meanwhile, stock analysts are advocating for mill companies to return cash to shareholders. BMO Capital Markets analyst

Mark Wilde

said it is hard to see how mill companies can spend their windfalls without destroying value, given the frothy market.

“It’s a lot of sailors hitting the town with a lot of money in their pocket, so silly things can happen,” he said on Canfor’s earnings call. He applauded Interfor’s move Wednesday to pay a special dividend of $1.65 a share.

Added shifts and new equipment should increase output on the margins, but mill executives expect supplies to remain tight and for prices to remain high into next year.

“Even if there was an opportunity to build inventories, distribution channels would be reluctant at current market prices,” said

Bart Bender,

Interfor’s head of sales and marketing.

Demand for lumber has skyrocketed during the pandemic, sending prices to all-time highs. This video explains what’s driving the lumber boom, who’s profiting, and why those growing the trees aren’t reaping the benefits. Illustration: Liz Ornitz/WSJ

Companies that buy wood from mills to distribute to builders, manufacturers and retailers have been limiting orders to exactly what customers need for fear of getting stuck with high-price inventory and falling prices, said

Michael Goodman,

whose family owns and operates Sherwood Lumber Corp.

The Melville, N.Y., company annually sells about a billion board feet of framing lumber to truss manufacturers, building-supply companies and shipping-crate makers. The firm doesn’t expect additional supplies before late next year or even 2023 and has been trying to manage its risk in the white-knuckle market by taking positions in the futures market.

“This is our job,” Mr. Goodman said. “We’re a middleman. We can’t not have stuff on the shelf.”

SHARE YOUR THOUGHTS

What impact has the availability and price of lumber had on your home construction or renovation project? Join the conversation below.

Write to Ryan Dezember at [email protected]

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Facebook, Twitter, eBay, Apple: What to Watch When the Stock | Sidnaz Blog


Here’s what we’re watching ahead of the opening bell on Thursday.

What’s Coming Up
  • Earnings are due from

    Kraft Heinz


    KHC 0.05%

    and

    Caterpillar


    CAT 0.85%

    before the open and from

    Amazon


    AMZN 1.20%

    and

    Gilead Sciences


    GILD -0.36%

    after the close.

  • Advance GDP estimates this morning will show just how strong the economic recovery in the first quarter has been: Forecast is for 6.5% expansion versus the final quarter last year. There will also be fresh weekly jobless claims numbers, which are expected to be lower than the previous week. 
Market Movers to Watch
  • Facebook


    FB 1.16%

    is up more than 7% ahead of the open after the social media company followed Google-parent Alphabet in reporting late Wednesday a first-quarter surge in advertising spending. Profit nearly doubled and overall revenue also beat forecasts.

  • The knock-out numbers from these two is also lifting

    Twitter,


    TWTR -0.47%

    up 3.5% premarket. Good advertising revenue would boost the company’s aim to double annual sales by 2023. Its latest earnings are due after the close.

  • Chipmaker

    Qualcomm


    QCOM -1.04%

    is also an early riser, up more than 5%, again on forecast beating earnings after the market closed Wednesday.

  • One technology name not doing so well is

    eBay,


    EBAY 1.00%

    down more than 5% premarket. The auction site beat forecasts with first quarter results late Wednesday, but its guidance on current trading disappointed investors.

  • Apple


    AAPL -0.60%

    shares added 2.7% premarket. Demand for new, higher-priced 5G iPhones helped fuel a more-than doubling of quarterly profit to $23.6 billion, off $89.6 billion in revenue. Apple stock has been among the weakest performers among large-cap tech companies this year, gaining less than 1%, versus a 9% rise by the Nasdaq Composite.

An iPhone advertisement in Shanghai on Feb. 12, 2021.



Photo:

Qilai Shen/Bloomberg News

Market Fact
  • 10-year Treasury yields have climbed steadily this year, rising to nearly 1.75% at the end of the first quarter from about 0.9% at the end of 2020 as investors anticipated an accelerating economic recovery following the worst of the pandemic.
Chart of the Day 
Must Reads Since You Went to Bed

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Commodities Boom Hits Home – WSJ | Sidnaz Blog


Prices are surging for the raw materials used to build American homes.

Lumber, one of the biggest costs in home-building after land and labor, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drain pipe, roof shingles and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in the autumn.

Prices for granite, insulation, concrete blocks and common brick have all pushed to records in 2021, according to the Bureau of Labor Statistic’s producer-price index, which measures the change in prices that producers receive for their output. Drywall and ceramic tiles are short of records but have also climbed.

Materials producers like paintmaker

Sherwin-Williams Co.


SHW 0.01%

and flooring manufacturer

Mohawk Industries Inc.


MHK -2.90%

as well as builders

D.R. Horton Inc.


DHI -0.55%

and

Hovnanian Enterprises Inc.


HOV -0.66%

have been raising prices to pass along higher costs. They can thank historically low borrowing costs, federal stimulus payments and a hunt for yield that has sent investors barreling into the home-rental business.

“Whoever the home buyers are, they have been able to pay for it,” said

Todd Tomalak,

who tracks building products for John Burns Real Estate Consulting.

American Homes 4 Rent,

which built more than 1,600 rentals last year and plans to construct another 2,000 houses this year, said its lumber bill is between $20,000 and $25,000 per house, up from about $10,000.

The National Association of Home Builders says that current lumber prices are posing a heavy burden for home builders and contractors.



Photo:

Charlotte Kesl for The Wall Street Journal

“Fortunately, we’ve been in a rental-rate growing environment, and that has kept us yield neutral,” said

Jack Corrigan,

the company’s chief investment officer.

Investors are watching all corners of the economy for signs of stimulus driving a pickup in inflation. They are finding it in housing, where rising input prices are translating into higher costs for consumer goods.

Federal Reserve policy makers say they haven’t seen enough of a jump in the price of goods and services to alter their course of holding interest rates near zero and pumping cash into the economy, which remains in recession and plagued by unemployment.

Rock-bottom mortgage rates have made owning a house more affordable, while the Fed’s purchasing of mortgage-backed securities has spurred lending. Lower household spending during the lockdown and federal stimulus checks have helped people accumulate down payments. House hunters are bidding up properties alongside legions of investors who are buying and building a growing share of America’s houses and renting them out.

The competition for houses has lifted home prices in almost every part of the country, enabling those who already owned to use their homes as cash machines. Americans pocketed $152.7 billion from cash-out refinancings last year and went on a remodeling bender.

Building supply chains weren’t prepared when Americans began swarming model homes and Home Depots in April. Sawmills and factories shut down like most other workplaces early in the lockdown. Oil wells were shut in, and refineries idled. A spate of hurricanes knocked out Gulf Coast facilities that produce polyvinyl chloride, or PVC, raising prices to records for the material used for waste pipes and siding, according to ICIS, which tracks chemical commodities.

Suppliers never caught up. Now building permits for residential construction are being issued at their highest rate since 2006. And the latest round of stimulus checks are landing in bank accounts just in time for spring, when Americans tend to house hunt and start remodeling projects.

CanWel Building Materials Group Ltd.

, which distributes building supplies in Canada and the western U.S., has enough orders for rot-resistant wood to keep its lumber-treating facilities running at capacity through 2021.

“We’re sold out. We can’t take on any more business this year,” Chief Executive

Amar Doman

told investors last week. “Everything that we’re producing is sold, and it’s out the door.”

Lumber and other wood products took off last summer and have remained aloft. Futures for delivery this month ran up to $1,040 per thousand board feet, nearly triple the typical price this time of year. The story is similar for oriented strand board, used for walls, floors and roofs. Many engineered wood products are in short supply and hard to find.

SHARE YOUR THOUGHTS

If you are remodeling or building a home, how have higher prices for materials affected your plans? Join the conversation below.

The National Association of Home Builders says that rising lumber prices have added $24,000 to the cost of building the average single-family home and about $9,000 per apartment. The lobbying group last week asked Commerce Secretary

Gina Raimondo

to seek immediate remedies to boost production.

“Current prices represent an intolerable and frequently insurmountable financial burden to home builders and contractors,” the group said.

Executives with D.R. Horton, the country’s largest home builder, said they are paying more for lumber as well as shingles and facing short supplies of windows and appliances.

“We are increasing our prices in general, but we balance our moves in prices relative to affordability and what we think our buyers can actually afford in terms of the monthly payments,” finance chief

Bill Wheat

said.

Builders boosted prices for nearly three quarters of all floor plans offered during January, according to RBC Capital Markets, compared with 54% of models that became more expensive in December.

Federal Reserve Chairman Jerome Powell tells WSJ’s Nick Timiraos there is no plan to raise interest rates until labor-market conditions are consistent with maximum employment and inflation is sustainably at 2%. Photo: Eric Baradat/Agence France-Presse/Getty Images.

Some builders are finding limits to what customers will pay. In Raleigh, N.C., Brant Chesson, CEO of Homes by Dickerson, said that last month he lost six customers in one day after he raised prices to cover higher lumber bills.

“Even though there still is a great sales pace, we lose customers every day,” he said.

At Burke Brothers Hardware nearby, owner Jeff Hastings is balancing rising costs with keeping customers. He is stocking up on copper wire before prices go any higher and sacrificing his own profit on lumber sales to attract customers who will add higher-margin items, like fasteners and tools, to their tickets.

“We’re not going to gouge people this year just to make a profit,” he said.

Write to Ryan Dezember at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Kraft Heinz Sends Mr. Peanut to a Better Place | Sidnaz Blog


Kraft Heinz might reach a deal to sell its Planters snack business for around $3 billion as soon as next week.



Photo:

Daniel Acker/Bloomberg News

Kraft Heinz is close to fetching a very attractive price for its Planters business. Next, it must use the proceeds wisely.

The company might reach a deal to sell the business to

Hormel Foods


HRL -2.91%

as soon as next week for around $3 billion, The Wall Street Journal reported Tuesday.

At first glance the nuts category is an attractive one, fitting the contemporary trend toward healthier, protein-based snacks. But it also lends itself to competition and commoditization: private-label brands hold about a one-third share, according to Barclays analyst Andrew Lazar.

Compounding the problem has been years of underinvestment in the brand under Kraft Heinz’s old mantra of cost-cutting above all. This left Planters largely confined to plain canned peanuts, while competitors invested in products such as flavored almonds marketed as an alternative to chips. Wells Fargo analyst John Baumgartner estimates that Planters’ market share fell around 7 percentage points to 18% between 2016 and 2019.

It appears to be a natural fit for Hormel’s protein-focused portfolio of meats and nut butters, but it might be overpaying. At $3 billion, Planters would be going for around three times 2019 sales, according to Wells Fargo’s Mr. Baumgartner. That would be a similar valuation to

Campbell Soup’s

acquisition of organic soup brand Pacific Foods in 2017 and

Danone’s

2016 deal for organic specialist WhiteWave Foods, maker of the Horizon organic milk brand, Mr. Baumgartner notes. But those are both more premium categories with better growth potential.

Investors should be encouraged that Kraft Heinz has turned its strategy all the way around from reckless acquisitions to prudent divestitures at attractive valuations. It likely has more struggling brands in its vast portfolio that it could and should part with.

But a long-term turnaround will only come when Kraft Heinz shows it can take the proceeds from divestitures and invest in updating its remaining brands, so they don’t meet the same fate as poor Mr. Peanut.

Will the coronavirus pandemic lead to long-term changes in how we shop for food? To better understand the challenges facing grocery stores, WSJ’s Alexander Hotz spoke with an industry insider, a store owner and a Walmart executive.

Write to Aaron Back at [email protected]

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SoftBank to Get Majority Stake in Katerra With $200 Million | Sidnaz Blog


SoftBank Group Corp. has agreed to invest $200 million more to bail out Katerra, a construction startup that ran into financial problems as it tried to shake up the building industry.

Katerra’s shareholders on Wednesday voted to approve the new investment on top of the roughly $2 billion SoftBank has already invested. Under the plan, the Japanese investment firm’s stake in Katerra will grow to give it a majority stake, while other investors will see their stakes severely diluted, according to people familiar with the matter.

SoftBank’s new investment will enable Katerra to avoid having to seek bankruptcy protection, according to Katerra’s chief executive, Paal Kibsgaard. The company needed SoftBank’s latest investment “to continue as a going concern,” he said in a notice to shareholders about Wednesday’s meeting.

As part of the funding package, SoftBank-backed financial-services firm Greensill Capital agreed to cancel around $435 million in debt owed by Katerra in exchange for a roughly 5% stake in the company, Mr. Kibsgaard said in an interview Wednesday.

Founded in 2015, Katerra has been trying to compete with established builders by assembling building parts in factories and offering services such as plumbing and architecture under one roof. 



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