Sinotruk to reduce debt with listing proceeds
Sinotruk (Hong Kong) will lower its debt-equity ratio to 55 per cent from 82.2 per cent after its initial public offering this month.
'Our gearing will decline substantially after raising money from the stock market,' executive director and president Cai Dong said.
'The high gearing mainly stems from the company's restructuring in 2000, for which we shouldered all costs,' added chairman Ma Chunji.
Sinotruk will use HK$2.5 billion, or 28 per cent of the expected proceeds, to repay some of its debts.
Jinan-based Sinotruk will issue 702 million new shares to raise up to US$1.15 billion. The sale of the public tranche runs from today to next Tuesday.
The stock will begin trading on November 27.
The nation's largest heavy-truck maker aims to more than double capacity to 150,000 units by 2010 from 70,000 units. It will also expand engine production capacity by 88 per cent from 100,000 units in three years.
In the first nine months, Sinotruk sold 63,274 heavy trucks, exceeding last full year's sales of 51,573 units.
It also exported 10,000 heavy trucks in the period. Plans are in the pipeline to enlarge exports to one-third of overall sales by 2010.
Sinotruk's products include cargo trucks, chassis and semi-tractor trucks, under the brands Howo, Sitaier King, Sitaier and Huanghe.
The firm said net profit surged 531 per cent to 656.3 million yuan last year from 123.6 million yuan in 2005, following the rebound of the heavy-truck market after 2004's austerity measures.
Net profit margin rose to 6.1 per cent from 1.4 per cent in 2005.
Along with its parent Sinotruk Group, Sinotruk has a 20.8 per cent share of the mainland market. Its competitors are Dongfeng Motor Group and FAW Group.
Mr Ma said he did not believe the company's legal dispute with a former subsidiary, Hong Kong-listed Weichai Power, would affect the listing process or Sinotruk's future operations.
'Sinotruk's parent is ready for the worst - that is compensation to Weichai if needs be, although we haven't breached any undertakings,' he said.
Weichai, which went independent last year, filed a patent lawsuit against Sinotruk earlier this year over four truck components.
China International Capital Corp and JP Morgan are the joint bookrunners and sponsors of the share issue.