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3 min read . Updated: 22 Feb 2022, 08:05 PM IST Three U.S.-listed Chinese education companies reported heavy losses after Beijing banned for-profit tutoring for most school-age children, showing the large financial toll of the crackdown on the industry last summer.
New Oriental Education & Technology Group Inc., one of the country’s largest private-education businesses, on Tuesday reported an $876 million loss for the six months to Nov. 30, compared with a net profit of about $229 million in its fiscal first half a year ago.
The 28-year-old company incurred sharply higher operating costs and expenses, due to employee layoffs and lease terminations at learning centers that it closed.
A day earlier, TAL Education Group said it lost $99 million in the three months to Nov. 30, pushing its net loss in the first nine months of its financial year to $1.03 billion. That compared with the company’s nine-month profit of $53 million a year earlier.
Gaotu Techedu Inc., which specializes in online education, reported a net loss of $526 million for the nine months ended Sept. 30, a significantly larger loss than in the same period a year earlier.
China’s booming private-education sector was targeted last year by a sudden and intense regulatory assault. It was one of several campaigns that led many global investors to question the risks and returns of investing in Chinese stocks. Beijing’s crackdowns have also hit sectors including internet-technology businesses and real estate, causing big selloffs.
The American depositary receipts of the three New York-listed education companies crashed last summer, wiping out billions of dollars in market capitalization after Chinese authorities released rules that would require tutoring services teaching school subjects to students undergoing compulsory years of education to operate as not-for-profit entities.
The measures also included fee standards and bans on capital raising and foreign ownership of education companies. Tutoring services on national holidays, weekends and school holidays would also be curbed. The government said its goal was to alleviate students’ homework and after-school tutoring burdens.
New Oriental went public on the New York Stock Exchange in 2006 and rode a boom in the private-education industry until early last year. The Beijing-based company operated 122 schools and more than 1,500 learning centers in China as of May 2021, and employed more than 54,000 teachers.
TAL, like New Oriental, operates centers that provide in-person instruction and offers online courses. Gaotu Techedu was founded more recently, in 2014.
All three companies said they have stopped providing tutoring services for school subjects for students in kindergarten through grade nine, which is the last year of compulsory education in China. They also warned of adverse hits to their future revenue as a result.
New Oriental last month said it let go of 60,000 staff members in 2021. Founder and Chairman Michael Yu at the time said New Oriental incurred nearly 20 billion yuan, the equivalent of $3.1 billion, to cover returning prepaid tuition, severance payments and breaking leases on existing teaching space.
To stay afloat, Chinese education companies have pivoted to other business areas. Gaotu Techedu said Tuesday that it will focus on its professional- and vocational-education services, as well as digital products, and that it plans to stop offering classes related to academic subjects to high-school students before the end of this month.
New Oriental said it is trying to provide more language instruction for adults and test-preparation courses, and it is exploring other business opportunities. It has also branched out into selling farm goods via live-streaming channels.
Late last year, the company began promoting fresh produce from vegetables to fish and mutton on ByteDance Ltd.’s popular short-video platform, Douyin. It created a brand called Oriental Select, and said it seeks to “connect farmers with everyone and make contributions to rural revitalization efforts," according to a marketing poster on Mr. Yu’s WeChat social-media account.
In the two months since its launch, Oriental Select facilitated transactions with a total merchandise value of 5.5 million yuan, equivalent to around $868,000, according to social media analytics provider Newrank.
This story has been published from a wire agency feed without modifications to the text
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