Two top officials quit troubled TCL
Chief operating officer and senior vice-president take responsibility for business losses, analysts say
TCL Corp, a mainland consumer electronic products maker struggling to turn its operations profitable, yesterday announced the resignations of two senior executives.
Analysts said the departures were an outcome of the company's failed television manufacturing joint venture and poor mobile handset business.
TCL said in a Shenzhen Stock Exchange statement that chief operating officer and director Yuan Xinsheng submitted his resignation on Tuesday for 'personal reasons', while Hu Quisheng resigned as senior vice-president and director for 'health reasons'. TCL has accepted their resignations.
A TCL spokesperson said Mr Hu would also relinquish his position as executive chairman of TTE Corp at the end of the month. TTE, the world's largest maker of television sets, is a joint venture set up with French electronics firm Thomson in January 2004.
'These two executives lost their positions because they were responsible for losses in the television and mobile phone businesses,' said Ivan Chung, ratings manager of Xinhua Finance. 'If there are losses, the management responsible leaves. This is normal for companies.'
Last year, Thomson sold its stake in TTE to TCL while French telecommunications firm Alcatel disposed of its entire stake in a mobile phone manufacturing joint venture it formed with TCL in 2004.
'TCL is a troubled company hiding behind deals with foreign firms which I don't think are working,' an industry source said. 'Normally, multinationals sell non-performing assets where they see no potential to Chinese companies.'
Company Watch, a British firm that assesses companies' financial health, gave TCL a 29 rating out of 100. A rating below 25 indicates a high risk of default.
Xinhua Finance, which runs a credit rating unit for Chinese companies, assigned a below-average credit rating of BB to TCL. Xinhua Finance had a negative outlook for TCL's credit rating because of the pressure the manufacturer faced from intense competition in the mobile phone and television markets, Mr Chung said.
'It will be a challenge for TCL to turn around this year. Profitability will continue to be bad,' he said.
TCL warned in April that it would incur a loss for the first half of this year, although it expected the loss to be smaller than its net loss of 692.6 million yuan during the same period last year. The projected first-half loss stemmed from the restructuring of TTE and the company's handset business, the company said.
In the first quarter, TCL posted a net loss of 130.3 million yuan, compared with a net loss of 327.2 million yuan a year earlier.
The company reported a net loss of 320.2 million yuan last year, compared with net profit of 245.2 million yuan in 2004, while its turnover grew 28.28 per cent to 51.68 billion yuan.
TCL's share price on the Shenzhen stock market fell 3 per cent to 2.59 yuan yesterday.