The strategic business that had been highly expected was sold off, and Guodian South has made new progress in its transformer business for many years.
On March 4, Guodian South proposed to transfer a 20% stake in its holding subsidiary Jiangsu Shangneng Xinte Transformer Co., Ltd. (hereinafter referred to as Jiangsu Shangneng) at a price of only 200,000 yuan. It is worth noting that after the transfer, the shares held by Guodian Nan from Jiangsu Shangneng will be reduced from 51.13% to 31.13%, losing absolute control.
As early as the end of 2010, Guodian South obtained a controlling stake in Jiangsu Shangneng with a capital increase of 54.2 million yuan. At that time, Guodian South transformed itself into a single-industry situation that focused on electric power automation equipment, and initially formed a business pattern including the intelligent primary equipment industry through mergers and acquisitions.
Transformer business, as the main component of Guodian Nanzi's intelligent primary equipment industry, Guodian Nan has placed high hopes on Jiangsu Shangneng. At the time of the share purchase, Guodian South announced that it expected Jiangsu Shangneng's 2012 revenue (including tax) to reach 500 million yuan, but the actual realized revenue was less than half of the expected. By 2015, its loss reached 48.796 million yuan.
Why did Jiangsu Shangneng's profit fall short of expectations after the merger and acquisition, and whether Guodian South has planned to divest the business segment, a reporter from "Daily Economic News" has successively called Guodian Nanzi's secretarial office and Jiangsu Shangneng. No response has been received as of press time.
Test the water at the end of 6 years to throw "burden"
Guodian South announced on March 4 that it intends to transfer 20% of Jiangsu Shangneng's equity based on the net asset assessment value as of September 30, 2016. The book net assets listed in the asset assessment declaration form are -7.95 million yuan. The total value of shareholders' equity is RMB 912,000, and the equity transfer price is RMB 200,000. Jiangsu Shangneng Transformer Business is the main component of Guodian Nanzi Intelligent Primary Equipment Industry, but its performance in recent years has not been satisfactory. In the first half of 2016, Guodian Nanzhi's smart primary equipment revenue was 122 million yuan, a decrease of 37.74% year-on-year. Jiangsu Shangneng's revenue was 102 million yuan, accounting for 83.6%, and its net profit was 26.712 million yuan.
Jiangsu Shengneng's losses also made it a burden, and Guodian South was quite optimistic about it when it acquired its control. In 2010, Guodian South accelerated its strategic transformation and changed its main business from electric power automation equipment manufacturing to the automation industry, intelligent primary equipment industry, new energy, and energy saving and emission reduction industries through equity acquisition, asset reorganization, and strategic cooperation.
In the smart primary equipment industry, Guodian South increased its capital to Jiangsu Shangneng with 54.2 million yuan at the end of 2010, holding a 51.13% stake. At the time of the acquisition in 2010, Guodian South stated in its announcement that it would be able to recover its dynamic investment in five years. It is estimated that in 2012, the operating income (including tax) of Jiangsu Shangneng would reach 500 million yuan. However, Jiangsu Shangneng's actual revenue in 2012 was less than half of Guodian South's own estimates, and its net profit was only 853,900 yuan. Five years later, Jiangsu was able to welcome a 200,000 yuan sale control.
Overall slump in the transformer industry
For the reasons for no longer holding Jiangsu Shangneng, in addition to the need to focus on the main force, there is also the decline in the overall business environment of Guodian Nanzi.
A reporter from "Daily Economic News" combed Guodian South from its main subsidiaries and joint stock companies and found that only Jiangsu's main products include transformers. Guodian South explained in the announcement that Jiangsu Shengneng's operating conditions continued to deteriorate due to "the impact of the disorderly competition situation which has been exacerbated by severe overcapacity."
Regarding the competition in the transformer industry, Soochow Securities quoted data from the China Industry Research Network, saying that in the Chinese transformer industry, foreign multinational companies have seized a large market share, and the low-end and mid-end transformer market is highly competitive. Since 2008, the growth rate of the transformer industry has decreased, and the growth rate in 2012 was only 0.16%.
After the rapid growth, it became stable, and the relative saturation of production capacity was behind it. As a leading company in the transformer industry, TBEA announced in January this year that TBEA plans to tighten its related investment because “the current domestic production and distribution industry ’s production capacity is basically saturated”. Behind this decision, TBEA In the first half of 2016, the operating income of transformer products decreased by 14.09% compared with the same period of the previous year.
Faced with industry saturation and unfavorable revenue, it is not just one or two companies. The reporter combed and found that Baobian Electric ’s five major subsidiaries involved in transformers and joint stock companies had a total net profit of 38.774 million yuan in the first half of 2016, while Baobian Electric ’s net profit decreased by 72.41%. In addition, Xintai Electric's oil-immersed power transformers' operating income in the first half of 2016 decreased by 214.39% compared with the same period of the previous year.