NVC Lighting's disputes with its former chairman Wu Changjiang may have a limited impact on the Hong Kong-listed firm's first-half results, but could prove costly in the second half. Headquartered in Huizhou city, Guangdong province, NVC is the largest contract manufacturer of lighting in China, according to a JPMorgan report. "The first-half results will not be very good," said Miles Xie Jianying, an analyst with Bocom International - the investment banking and securities unit of the Bank of Communications. "But the impact of Wu's resignation on NVC's results in the first half will be limited because he resigned in late May." Wu, who founded NVC in 2006, resigned as chairman and CEO on May 24. On August 14, NVC warned of a large drop in profit for the first half due to increased production costs, a decrease in demand and sales, and Wu's resignation. But Kim Eng Securities' analyst Alex Yeung said he did not believe NVC would report a big loss in the first half. However, Wu could induce NVC's suppliers and distributors to stop doing business with the company because of his strong ties with them, Yeung warned. "This should impact earnings [in the second half] a lot." In a Kim Eng report on May 28, Yeung wrote: "One of the competitive advantages of NVC is its wide-reaching distribution channel in China, which had been built up largely by Wu's personal effort." Bocom International's Xie agreed with this caution. "The biggest risk is of distributors refusing to work with the company. That will have a huge impact on sales and profits," he said. In July, 36 distributors, accounting for 64.5 per cent of NVC's revenue last year, suspended placing orders with NVC for two weeks but resumed on July 28, NVC said on August 14. On August 21 it added that some suppliers halted supplying raw material to the company, and its factories in Huizhou and Chongqing had suffered disruptions but operations continued. There were strikes lasting two weeks in the Huizhou and Chongqing factories in July "because of some disagreements with management" as the strikers demanded Wu's reappointment as chairman, NVC said. Chang Xin Hardware, a supplier of raw material to NVC, is owned by Wu's cousin, Yin Yan, according to NVC's listing prospectus. Also, Chongqing En Wei Xi Industrial Development, a contract manufacturer for NVC, is 49.67 per cent owned by Wu's father-in-law, Wu Xianmin, according to the prospectus. Chongqing En Wei Xi owes NVC 25 million yuan (HK$30.59 million) in prepayments but does not have the money to repay that amount, NVC announced on August 14. NVC listed in Hong Kong in May 2010. As a risk factor, its IPO prospectus warned: "Our success depends heavily upon our senior management team. In particular, Wu Changjiang remains central to our company. "If Mr Wu or any other member of our management is unable to continue in their positions, our business may be disrupted and our financial condition and operations may be materially and adversely affected."