Company sees gearing grow to 118pc after the acquisition of two tool producers Techtronic Industries yesterday backed away from its goal of being debt-free by the end of next year, citing expenses associated with the acquisition of two tool manufacturers. The company's gearing, now at 118.6 per cent, will remain high until the end of this year, according to chief financial officer Frank Chan Chi-chung. Assuming US$140 million of convertible bonds issued in June last year were fully converted, Techtronic's gearing could decrease to 70.4 per cent by the end of this year, Mr Chan said. 'By the end of 2006, we will have gearing at a level we are comfortable with - 30 per cent to 35 per cent.' In May, the company said its gearing was 90 per cent and expected to return to a net cash position by the end of next year. The high debt level is mitigated by strong cash flows. Techtronic was in a net cash position at the end of last year but its gearing shot up after acquiring Milwaukee Electric Tool Corp of the United States and Atlas Copco Electric Tools of Germany from Swedish conglomerate Atlas Copco for US$713 million. The deal was closed on January 1, allowing Techtronic to fully book the financials of these two firms in the first half of this year. Techtronic's interim net profit rose 52.7 per cent to $456.36 million while its turnover grew 52 per cent to $10.21 billion. Interest coverage - the ratio of pretax profit to interest liabilities - fell to 5.3 times at end-June, from 11.6 last year. Turnover in the core power tool business jumped 67.4 per cent to $7.89 billion with contributions from the newly acquired units, Techtronic vice-president David Butts said. Excluding the acquisitions, Techtronic's organic turnover growth in the first half was in 'strong double digits', Mr Butts said. Techtronic chairman Horst Julius Pudwill said: 'We have a robust outlook for the rest of this year with a flow of new products. Strong sales momentum of the power tool business will continue.' For the whole of this year, Kim Eng Securities projects that Techtronic's revenue will reach $24.86 billion and net profit $1.45 billion. Techtronic was still on the lookout for further acquisitions, Mr Pudwill said. 'The acquisitions must be earnings-accretive and synergise with our business and not made just for the sake of increasing revenue,' he said.