China Tire Announces Consolidated Results For The Year Ended Dec 1999
10 May 2000
China Tire Holding Limited Announces Consolidated Results For The Year Ended December 31, 1999
Proposed to Change Its Name to 'China Tire e-commerce.com Limited'
NEW YORK, May 9 China Tire Holdings Limited ("China Tire"
or the "Company") announced its audited consolidated results for
the year ended December 31, 1999:
Financial Highlights
Year ended Year ended Change %
December 31 December 31
1998 1999
Turnover Rmb 2,660.3 M Rmb 2,622.4 M 1.4%
Net income (loss) Rmb 279.1 K Rmb (153.2 M) 54,999%
Earnings (loss)/share Rmb 0.03 Rmb (16.83) 56,2000%
For the year ended December 31, 1999, China Tire reported consolidated
sales of Renminbi ("Rmb") Rmb2,622.4 million (US$316.7 million). In 1999, the
operating subsidiaries under China Tire included five Sino-foreign equity
joint ventures in the People's Republic of China ("PRC Operating
Subsidiaries"): Double Happiness, Hangzhou Zhongce, Yinchuan CSI, Yantai CSI
and Shandong Synthetic, and four international corporations: Orion Tire, Orion
B.V.I., Container Limited and CSI Rubber.
China Tire manufactured and sold a total of approximately 6.9 million sets
of a large variety of tires in 1999 representing an increase of approximately
9% over 1998 despite the intensive competition in the PRC tire market.
China Tire remains one of the leading tire manufacturers in China. The
Company has achieved a total turnover of Rmb2.62 billion for the year ended
December 31, 1999, representing a 1.4% decrease over the 1998 turnover of
Rmb2.66 billion. This is mainly due to lower selling prices in the domestic
as well as export markets as compared with last year.
The Company has achieved a gross profit of 11.47% as compared with 16.31%
in the year of 1998. The decrease is mainly due to the lower selling prices,
increase in cost of goods sold due to the general increase in the price of a
major raw material and the expiry of VAT refunds previously enjoyed by an
operating subsidiary.
The Company has incurred an operating loss of Rmb3O.5 million in 1999 as
compared with a profit of Rmbl54.5 million in 1998. This is mainly due to
lower gross margin in the difficult operating environment and provision
against long outstanding receivables.
The Company has incurred net interest expense of Rmb47.6 million as
compared with Rmb64.3 million in 1998. The decrease of Rmbl6.7 million is
mainly due to the general reduction in interest rate in the PRC.
China Tire's consolidated net loss was Rmb153.2 million (US$18.5 million)
for the year ended December 31, 1999 as compared to a net income of
Rmb279.1 thousand (US$33.7 thousand) in 1998. The decrease in net income is
mainly due to a provision for impairment of loss on fixed assets of
Rmb122.0 million recorded by a PRC operating subsidiary and a provision on a
loan receivable from Chongqing factory of Rmb34.9 million. Besides, China
Tire's loss before income taxes and minority interests was Rmb235.0 million as
compared to a profit of Rmb62.9 million in 1998.
During 1995, the Company began to renegotiate the terms of its joint
venture agreement for Chongqing CSI Tyre Co. Limited ("Chongqing CSI") with
its joint venture partner, Chongqing Tyre Chief Factory ("Chongqing Factory").
In 1997, the Company proposed a termination of the joint venture agreement of
Chongqing CSI (the "Termination") with Chongqing Factory which was agreed by
the supervisory authority for Chongqing Factory. Both parties also agreed
that the capital injected by the Company would be treated as an interest
bearing loan from the date of contribution. However, as recovery of the
investment/loan was not forthcoming, the Company initiated arbitration
proceedings (the "Proceedings") in the PRC against Chongqing Factory to
enforce the Termination and to recover the original investment in the amount
of Rmb57.0 million as well as the related legal expenses for the Proceedings
(estimated in the amount of Rmb3.0 million). The application for the
arbitration was accepted by the China International Economic and Trade
Arbitration Commission, Shenzhen Commission and the Commission issued a
judgment in favor of China Tire on March 31, 2000 as follows:
1) The joint venture agreement of Chongqing CSI with Chongqing Factory
was terminated and the joint venture is to be liquidated according
to the relevant rules and regulations.
2) China Tire was entitled to damages of Rmbl5,162,125 as compensation
for financial losses suffered. Such amount should be paid to China
Tire by Chongqing Factory within 45 days from the date of judgment.
3) All other claims by China Tire were dismissed.
In view of the expected long duration of and the uncertainty of amounts
to be recovered from the liquidation of the joint venture and after taking
into consideration, the compensation for financial losses to be paid by the
Chinese Party, the Board took a prudent view and made a provision against the
outstanding principal balance of the Loan amounting to Rmb34.9 million in the
1999 accounts.
During the year of 1999, Orion Tire's major banker, Pacific Bank N.A.,
lodged a legal claim against China Tire in Hong Kong to enforce a corporate
guarantee amounting to approximately US$2.1 million, provided to Orion Tire
for its banking facilities by China Tire. China Tire is filing a defense
against the claim and a court hearing is scheduled to be held on May 18, 2000.
During 1999, China Tire paid total dividends of US$728,000. In 2000, the
Board of Directors also declared and paid a quarterly dividend of US$0.02 per
share of Supervoting Common Stock and Common Stock for the first quarter of
2000. On May 9, 2000, another quarterly dividend of US$0.02 per share of
Common Stock was declared, and will be paid on June 30, 2000. The record date
for the second quarterly dividend is June 16, 2000.
China Tire has been moving to set up its Internet portal for tire trades
and to provide information and news on market direction and development in
the China tire industry. To better reflect the vision and the business
strategy of the Company in the emergence of electronic commerce, the Board
proposed to change the Company name to "China Tire e-commerce.com.
Limited." The new name will become effective upon shareholders' approval at
the forthcoming annual general meeting and the consent of the Registrar of
Companies in Bermuda.
The Annual General Meetings for China Tire will be held in Hong Kong on
June 27, 2000. Based on the record date of May 3, 2000, the Company will send
notice of the meeting and proxy statement to shareholders on June 1, 2000.
** For the convenience of readers, the translation of amounts from
Renminbi (Rmb) into United States Dollar (US$) has been made, at the unified
exchange rate quoted by the People's Bank of China on December 31, 1999 of
US$1.00 = Rmb8.28. No representation is made that the Renminbi amounts could
have been, or could be, converted into United States Dollars at that rate on
December 31, 1999 or at any other rate.
China Tire Holdings Limited - Financial Highlights
Consolidated Statements of Income:
For the year ended December 3l
1998 1999
Note (1) (1)
Rmb'000 Rmb'000 US$'000 (3)
(except for earnings (loss) per common share)
Sales 2,660,325 2,622,410 316,716
Cost of goods sold (2,226,443) (2,321,743) (280,404)
Selling and administrative
expenses (279,398) (331,131) (39,991)
Operating Income (loss) (5) 154,484 (30,464) (3,679)
Interest expense, net (64,309) (47,632) (5,753)
Other losses (2) (25,500) (156,935) (18,954)
Share of result of an
unconsolidated subsidiary (1,773) -- --
Income (loss) before income taxes
and minority interests 62,902 (235,031) (28,386)
Provision for income taxes (19,767) (5,289) (638)
Income (loss) before
minority interests 43,135 (240,320) (29,024)
Minority interests (42,856) 87,124 10,522
Net income (loss) 279 (153,196) (18,502)
Earnings (loss) per
common share - Basic (4) 0.03 (16.83) (2.03)
Consolidated Balance Sheets Data: As at December 31
1998 1999
Note (1) (1)
Rmb'000 Rmb'000 US$'000 (3)
Working Capital 611,680 557,824 67,370
Property, plant and
equipment, net 1,220,496 1,089,324 131,561
Total assets 3,497,035 3,316,944 400,597
Current liabilities 1,410,756 1,492,226 180,221
Non-current portion of
long-term bank loans 65,000 58,500 7,065
Due to Chinese joint venture
partners 72,783 122,625 14,810
Minority interests 744,337 601,337 72,625
Shareholders' equity 1,200,885 1,041,662 125,805
Consolidated Statements of Cash Flow Data:
For the year ended December 3l
1998 1999
Note (1) (1)
Rmb'000 Rmb'000 US$'000 (3)
Depreciation and
amortization 103,029 104,036 12,565
Proceeds from transfer of
certain property, plant and
equipment to an associated
company 68,053 -- --
Capital expenditures on property,
plant and equipment (62,450) (95,209) (11,499)
Acquisition of listed securities
held for long-term purposes (41,061) -- --
Acquisition of listed securities
held for trading purposes -- (82,800) (10,000)
Hangzhou Zhongce - Summary Financial Information
Year ended Year ended
Note December 31, December 31,
1998 1999
Rmb'000
Sales 1,256,656 1,337,513
Gross profit 168,883 137,676
Operating income (5) 91,603 51,797
Net income 39,380 11,163
Double Happiness - Summary Financial Information
Year ended Year ended
Note December 31, December 31,
1998 1999
Rmb'000
Sales 446,310 488,197
Gross profit 82,388 62,466
Operating income (5) 23,659 4,591
Provision for impairment loss
of long-lived assets (5,000) (122,000)
Net loss (2,431) (132,100)
Yinchuan CSI - Summary Financial Information
Year ended Year ended
December 31, December 31,
Note 1998 1999
Rmb'000
Sales 845,688 728,210
Gross profit 166,844 87,408
Operating income (loss) (5) 77,660 (18,062)
Net income (loss) 63,451 (23,317)
The Operating Subsidiaries
Hangzhou Zhongce
Hangzhou Zhongce - Summary Financial Information
For the year For the year
ended ended
December 31, December 31,
1998 1999
(amounts in thousands Rmb)
Sales 1,256,656 1,337,513
Gross profit 168,883 137,676
Operating income (1) 91,603 51,797
Net income 39,380 11,163
(1) Opening income means income before income taxes and net interest
expenses.
For the year ended December 31, 1999 and 1998
Sales increased 6.4% or Rmb80.9 million to Rmb1.3 billion in the year of
1999 from 1998. This increase was principally attributable to a 13.5%
increase in sales volume in motor vehicle tires and 7% increase in bicycle
tires. In order to maintain the existing market share, and to remain
competitive in the market, the favorable contribution to revenue due to such
growth in sales volume was partially offset by a general decrease in selling
prices of tires.
Gross Profit decreased 18.5% to Rmb137.7 million in the year of 1999 from
Rmb168.9 million in the year of 1998 and decreased a percentage of sales to
10.3% in the year of 1999 compared with 13.4% in the year of 1998. The
decrease in gross margin was because of the increase in the price of major raw
materials and a general decrease in selling prices of tires in the domestic as
well as overseas markets.
Operating income decreased 43.5% to Rmb51.8 million in the year of 1999
from Rmb91.6 million in the year of 1998 was mainly due to the decline in
gross profit. As a percentage of sales, it decreased to 3.9% in the year of
1999 compared to 7.3% in the year of 1998.
Net income decreased by 71.7% to Rmbl1.2 million in the year of 1999 from
Rmb39.4 million in the year of 1998, and also as a percentage of sales to 0.8%
in the year of 1999 compared to 3.1% in the year of 1998. This decrease was
mainly attributable to the reduction in gross margin of the Company but the
decrease in net income was partially offset by the effect of a 20.3% reduction
in interest expense. The interest expense was Rmb37.6 million in the year of
1999 compared with Rmb47.2 million in the last period.
Double Happiness
Double Happiness - Summary Financial Information
Year ended Year ended
Note December 31, December 31,
1998 1999
(amounts in thousands Rmb')
Sales 446,310 488,197
Gross profit 82,388 62,466
Operating income (1) 23,659 4,591
Provision for impairment loss
of long-lived assets (5,000) (122,000)
Net loss (2,431) (132,100)
(1) Operating income means income before income taxes, net interest
expenses and provision for impairment loss of long-lived assets.
For the year ended December 31, 1999 and 1998
Sales volume of Double Happiness increased 17% while the absolute amount
of sales increased by 9.4% to Rmb488.2 million in the year of 1999 from
Rmb446.3 million in the year of 1998. This was primarily due to a general
decrease in the selling price of tires because of strong competition in the
market.
Gross profit decreased by 24.2% to Rmb62.5 million in the year of 1999
from Rmb82.4 million in the year of 1998, and also decrease to 12.8% as a
percentage of sales in the year of 1999 compared with 18.5% in the year of
1998. The decrease was due to lower selling prices and increase in major raw
material costs.
Operating income of Double Happiness decreased by 80.6% to Rmb4.6 million
in the year of 1999 from Rmb23.7 million in the year of 1998. This decrease
was principally due to the decline in gross profit.
Net loss increased by Rmb129.7 million to Rmbl32.1 million in the year of
1999 from a net loss of Rmb2.4 million in the year of 1998. This was mainly
due to the decreased gross margin and a provision for impairment loss in value
of the assets of a radial tire project in the amount of Rmb122.0 million.
Yinchuan CSI
Yinchuan CSI - Summary Financial Information
Year ended Year ended
December 31, December 31,
Note 1998 1999
Rmb'000
Sales 845,688 728,210
Gross profit 166,844 87,408
Operating income (loss) (1) 77,660 (18,062)
Net income (loss) 63,451 (23,317)
(1) Operating income (loss) means income before income taxes and net
interest expenses.
For the Year ended December 31, 1999 and 1998
Sales decreased by 13.9% to Rmb728.2 million in the year of 1999, from
Rmb845.7 million in the year of 1998. The decrease in sales was primarily due
to a 6% decrease in the volume of tire sales together with a general decrease
in selling prices.
Yinchuan CSI's gross profit decreased 47.6% to Rmb87.4 million in the year
of 1999, from Rmb166.8 million in the year of 1998 and decreased as a
percentage of sales to 12.0% in the year of 1999 compared to 19.7% in the year
of 1998. The decrease in gross profit was attributable to the dual effect of
decrease in sales and the expiry of the grandfather tax refund entitlement by
the end of 1998. In the year of 1998, there was a refund of Rmb50.3 million
which was accounted for as a reduction of cost of sales of Yinchuan CSI.
The company had an operating loss of Rmb18.1 million in the year of 1999
compared with an operating income of Rmb77.7 million in the year of 1998. As
a percentage of sales, net loss was (2.5)% in the year of 1999 compared with
9.2% in the year of 1998. This decrease was due to the decrease in gross
profit and increased provision for long outstanding receivables as compared
with 1998.
Net loss for the year of 1999 was Rmb23.3 million in the year of 1999
compared with a net income of Rmb63.5 million in the year of 1998. It
represents (3.2)% as a percentage of sales in the year of 1999 compared with
7.5% for the year of 1998. This decrease was primarily due to the decrease in
gross margin and the increased bad debt provision.
Orion Tire
During the year of 1999, Orion Tire's major banker, Pacific Bank N.A., had
lodged a legal claim against China Tire to enforce a corporate guarantee
amounting to approximately US$2.1 million provided to Orion Tire for its
banking facilities. China Tire is filing a defense against the claim and a
court hearing is scheduled to be held on May 18, 2000.
Yantai CSI, Shandong Synthetic, CSI Rubber, Container Ltd, Orion Tire and
Orion BVI
No summary financial information has been provided for Yantai CSI,
Shandong Synthetic, CSI Rubber, Container Ltd. Orion Tire and Orion BVI as
their operations are insignificant when compared to the other Operating
Subsidiaries.