Kelon warns scandals will wipe 20pc off sales
Embattled appliance maker says fallout will be seriously felt this year and next
Troubled Guangdong Kelon Electrical Holdings has warned recent financial scandals will seriously reduce sales this year and next.
The leading appliance maker was aiming to sell 4.5 million refrigerators and three million air-conditioners next year, president Tang Yeguo said at a ceremony yesterday to mark the takeover of the firm by state-owned Hisense Group.
Next year's target was well below the Hong Kong and Shenzhen-listed company's goal for this year of six million refrigerators and four million air-conditioners, Kelon vice-president Lin Lan said. But this year, actual sales would be down 20 per cent from last year, when turnover was 8.44 billion yuan, due to financial investigations centring on the firm's former chairman, he said.
'This year, profitability is definitely not achievable, but next year, it is. Next year, we must have profit. That is not negotiable,' he said.
Next year's exports of air-conditioners would drop to one million units from 1.7 million units this year, although refrigerator exports would rise to 2.5 million units next year from 1.7 million units this year, Mr Lin said.
Kelon's investigation by the China Securities Regulatory Commission earlier this year led to the dismissal of chairman Gu Chujun in August and his arrest on September 2 on suspicion of economic crimes. The scandal disrupted supplies and banks tightened credit, resulting in a drastic drop in production.
On September 9, Qingdao Hisense Air-Conditioner, a subsidiary of Hisense Group, signed an agreement to acquire Gu's controlling 26.43 per cent stake in Kelon.
The share transfer is pending approval by China's Ministry of Commerce and the local government of Qingdao city, Shandong province, where Hisense Group is based.
But Mr Lin said the acquisition was supported 'by all levels of government from the State Council to the Shunde government'.
Hisense Group is a large state enterprise with 27.3 billion yuan turnover last year. It is under the indirect control of the State Council, China's highest ruling body.
As for the Shunde government, it played a crucial role in convincing international appliance firms such as Whirlpool of the United States and Electrolux of Sweden to remain customers of Kelon during the past few difficult months, Mr Lin said.
A British client, Hi Group, yesterday signed US$75 million worth of orders for next year, sharply higher than the trading firm's purchase of nearly US$40 million worth of appliances this year.
A few days ago, China Merchants Bank extended a 130 million yuan loan to the company.
'Since Hisense entered the picture, Kelon's operating environment has turned around with support from the State Council, the Guangdong provincial government and the Shunde government. Kelon will have a more glorious tomorrow,' said Mr Tang, a former Hisense executive.
