US cinema chain AMC’s shares plummet 25pc on profit warning in latest setback to China’s Wanda Group
Troubled Chinese real estate conglomerate Dalian Wanda Group has received another setback after shares of its US cinema subsidiary, AMC Entertainment Holdings, plummeted 25 per cent on Tuesday after it issued a profit warning for the second quarter.
AMC Entertainment Holdings, the world’s largest movie theatre owner, said in a statement that it expected to report a net loss for the second quarter of 2017 of between US$178.5 million and US$174.5 million, or US$1.36 and US$1.34 a share, compared to net earnings of US$24.0 million for the second quarter last year.
After issuing the warning shares of New York listed AMC plummeted 25 per cent from US$20.8 to US$15 in after hours trading.
Dalian Wanda Group became AMC’s controlling shareholder after the Chinese company bought the cinema chain in 2012 for US$2.6 billion. Since then Wang Jianlin, the billionaire who controls Wanda Group, has been building up his own media empire with acquisitions in the UK and Sweden.
However, Wang’s dreams of a global media empire are in serious doubt after reports that mainland Chinese authorities are scrutinising Wang’s overseas transactions and have cut off his funding. China’s major lenders have been ordered not to provide any funding for Wanda Group’s six overseas projects.
AMC has been making the case that it is not dependent on Wanda’s funding, issuing a statement saying its four most recent acquisitions, including the US$1.1 billion deal to buy rival Carmike Cinemas last year and the acquisition of Nordic Cinema Group this year, were completed and fully funded from its own resources and that Dalian Wanda has “never been a source of acquisition funding for AMC”. It added that “mainland China-based banks have never been a source of any funding for AMC”.
Box office takings in North America, including Canada, fell 3.3 per cent in the second quarter while the US box office was down about 4.4 per cent compared to the same period in 2016, according to AMC.
The cinema chain is due to report its complete second quarter earnings results on August 7.
Separately, Legendary Entertainment, the studio behind Hollywood blockbusters Jurassic World, Batman Begins and The Great Wall, which was bought for US$3.5 billion by Wanda in 2016, also distanced itself from the parent company. In a statement Legendary said it was “well capitalised with liquidity to fund its film and TV slates and operate its business as usual”.
