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SCMP Reporter

H-share Northeast Electrical Transmission & Transformation Machinery Manufacturing Co (NEMM) is understood to be planning a restructuring to enhance profitability.

 Chairman Xiang Yongchun said the company and its parent Northeast Electrical Transmission & Transformation Equipment Group Co had restructuring plans.

 'Restructuring is a major means to improve the profitability of the company,' he said.

 He would not divulge details or the timing of the restructuring as they were not finalised.

 Mr Xiang hinted the plan could involve internal asset restructuring and mergers and acquisitions and said the aim was to buy into complementary enterprises to support the company's production capacity.

 'The restructuring will not require central government approval but may need local government approval if the enterprises involved are under the jurisdiction of local governments,' Mr Xiang said.

 The restructuring was initiated internally and was not called for by the government, he said.

 This runs contrary to the restructuring of Yizheng Chemical Fibre in which its parent will merge with three petrochemical companies as part of a wider plan by Beijing to revitalise its moribund state-owned enterprises - a key subject of the 15th Party Congress next month.

 Mr Xiang said the company cut prices of its main product, transformers, by about 6.7 per cent in the first half to maintain its 40 per cent market share on the mainland.

 Gross profit margin on transformers dropped one percentage point to almost 25 per cent while the margin for other products declined three percentage points to about 26.6 per cent.

 The company said it would be able to maintain its gross profit margin, adding it could not endlessly reduce prices to maintain market share.

 It achieved sales of 1.35 billion yuan (about HK$1.25 billion) last year and has received orders for 1.6 billion yuan so far this year.

 Mr Xiang said sales and net profit should improve further in the second half.

 The company posted 4 per cent growth in net profit to 36.3 million yuan and a 38 per cent increase in sales to 716.7 million yuan in the first half, although last year's base was smaller than the previous year due to difficult market conditions.

 Mr Xiang said the company decided against investing in a transformer plant in Chongqing in Sichuan and was in talks with domestic and foreign partners on a plant in Yichang in Hubei.



NEMM plans restructuring