Fuyang Bearing Loss in the Third Quarter of 2011

In the context of the slowdown in the domestic low-end bearing industry and the downturn in the downstream industry, Puyang Bearing reported a net profit loss of 4,874,500 yuan in the third quarter, a loss of 13.20% compared to the same period of last year. The total loss for the first three quarters was 7,194,300 yuan. Loss of 48.47% in the same period last year.

At the same time, the company launched a private placement, plans to raise 680 million yuan to further expand the existing product production capacity but spurred the stock price, this week, Sunyang Bearing reached a recent record low of 4.9 yuan.

680 million huge sums of money "making new bottled old wine"

Sunyang Bearing reported in the third quarter that the total cost of product sales increased due to rising raw material prices. During the reporting period, the company’s operating income increased by 12%, but its net profit was a loss of 4,876,500 yuan.

The main reason for the decline in the company's performance was due to the fierce competition in the middle and low end of the domestic bearing market. There was no change in the situation of loose, chaotic, and bad markets. The market competition became fiercer, and the price war was still the main method in the competition. The downstream auto industry has entered a period of relatively stable development after experiencing explosive growth in the past two years; plus the increase in the cost of raw materials at the upstream, and the three-way factor superposition leads to Fuyang Bearing “only long bones are not long meat”.

Listed in 13 years of undisclosed Xiangyang Bearing's refinancing plan was thrown out, but the stock price continued to fall continuously, which was more than 14% from the issue price of 5.72 yuan in the plan. On the 24th of this month, the 4.99 yuan that came out of the session hit a record low since 2009.

“The last time the fundraising project not only lost faith in investors in terms of investment returns, but it is also a bad thing for fund-raising operations. I am afraid that everyone is not optimistic about this refinancing,” said a private equity person in Wuhan.

Fuyang Bearing had financed 154 million yuan in 2000 for the construction of a "double plus" project "Ninth Five-Year Plan" for passenger car bearing technology and a project of automotive air conditioning compressor system bearing technology. However, as of September 30, 2011, the raised funds have all been used up.

How about the benefits of raising investment? The reporter’s review of the company’s history found that after the raised investment project was completed in 2000, the annual sales income was 234 million yuan and the total annual profit was 40 million yuan. Up to now, the cumulative benefit measured is 624 million yuan, but the actual cumulative benefit is only 110 million yuan.

In terms of profit distribution, the reporter reviewed the company’s annual report, found that since the listing of Xiangyang Bearing has never been dividends to shareholders in 13 years, and in the past four years, the average dividend ratio of listed companies in the Shanghai and Shenzhen Machinery Industry is about 20%.

Under this background, other domestic bearing enterprises have transformed and developed high-speed products such as high-speed rail, wind power, and precision CNC machine tools. However, Xiangyang Bearing is preparing to raise approximately RMB 680 million through a private placement, further expanding the existing products for commercial vehicle tapered roller bearings. And car production capacity for constant velocity joints.

Xiangyang Bearing previously announced that it plans to issue 120 million shares of non-public shares at a price of not less than RMB 5.72 per share. It plans to raise funds to 686.4 million yuan from a specific target of not more than 10 including the Third Ring Group Company. The first phase of the construction project of the Third Ring Industrial Park.