Shares in crisis-hit NVC lose 25pc

Boardroom battle, resignations, strikes and trouble with distributors send shares in NVC crashing down

PUBLISHED : Thursday, 16 August, 2012, 12:00am
UPDATED : Thursday, 16 August, 2012, 9:44am

NVC Lighting Holding shares lost more than a quarter of their value yesterday after the mainland firm disclosed a litany of problems including a dispute with its former chairman, the resignation of senior management, strikes at its factories, and problems with distributors.

NVC was the worst performing stock on the Hong Kong exchange, with 417 million shares changing hands on its heaviest trading day. It fell 28.37 per cent to HK$1.01.

NVC, the largest lighting manufacturer in China, warned its profit would fall significantly in the first half due to the resignation of Wu Changjiang as its chairman in May, lower sales and higher production costs. It also said Karel Robert den Daas quit on August 9 as independent non-executive director, "due to differences in views over the future strategic direction of the company".

NVC vice-president Li Rui and general manager Li Xinyu resigned, bowing to the request of striking workers at its factories in Chongqing and Huizhou city, Guangdong province, NVC said. The two men were former employees of Schneider Electric, a French conglomerate which became NVC's second-largest shareholder and strategic partner in July last year. Schneider owns 9.13 per cent of NVC, while Wu is the biggest shareholder with 38 per cent and Goldman Sachs holds 5.67 per cent, according to the Hong Kong exchange website. Workers went on strike at the two plants from July 13 to 27, and their requests included the reappointment of Wu as chairman, pay rises and no retaliation against employees, NVC said. It formed an investigation team in response to reports about Wu being investigated.

"In view of the findings of the investigation team, the board considers it would be inappropriate for Mr Wu to be reappointed as chairman and director of the company," NVC said. Wu told the investigation team he was not being investigated but is assisting with a probe, NVC said.

"The biggest problem with NVC is its management issue. The question is whether Wu will be reappointed chairman," said Guoyan Securities analyst Yu Xiaoli. Although NVC said it would not reappoint Wu as chairman, it cannot be ruled out, Yu said.

Wu told the investigation team that during NVC's IPO in May 2010, he arranged for five or six individual investors to buy HK$100 million of NVC shares on behalf of some employees and distributors. One of these investors was Wu's former wife, NVC said. "Wu emphasised that he was not the ultimate beneficial owner of these shares," the firm said.

Wu admitted to the investigators he had accepted personal loans from 10 distributors in return for a referral of a business opportunity to them, but said this was unrelated to NVC. For two weeks in July, NVC's key distributors suspended orders from being placed with the company, NVC said. The firm also said it was aware of reports about a new company being set up by the distributors to make products to compete with NVC goods. The board said it was unable to confirm these reports.

Bocom International's Miles Xie Jianying said: "The big question is whether the distributors will form a new company - that is the biggest risk." Wu told investigators that in 2010 he had referred an opportunity to develop property in Chongqing to NVC Real Estate Development, which is not related to NVC, the firm said. Wu's wife was previously a shareholder in NVC Real Estate but has since sold her stake in the devleloper, it said. Wu did not respond to a request for comment.