East China CNC losses to expand debt capping the proposed increase repayment

East China Numerical Control (002248) SZ) last night issued a semi-annual report, the first half of the huge loss of 29.177 million, loss margin continues to expand. At the same time, the company only long-term loans and short-term borrowing amount of up to 930 million, the first half of interest expense only 26.972 million. Under the enormous financial pressure, the company starts to increase the plan, intends to finance from the stock market to ease the debt pressure. Recently, the company announced that the revised plan has been approved by the SFC, to raise funds not more than 320 million yuan, after deducting the handling charges are all used to repay the bank loans. High financial risk This March, the East China Numerical control in the plan to increase the size of the company's debt concerns, that the current stage of operation is difficult to support the size of the company's high debt. East China CNC to production and operation of large-scale CNC machine tools for the main business, by the downstream fixed assets investment cyclical impact seriously. In the first half of this year, the company realized operating income of 160 million yuan, down 36.54%, attributable to the listed company's shareholders net profit of 29.177 million yuan, compared to the same period last year, the loss margin continued to expand. In recent years, the scale of corporate debt has been growing continuously, and the ratio of asset-liability is climbed. At the end of June this year, the company's assets and liabilities rate reached 58.41%, higher than the same industry. Corporate debt size accounted for annual sales of the proportion of the growth rate is also very alarming, as at the end of last year, the company's total debt/sales revenue ratio of 321.9%, far higher than the same industry level. By the end of June 2013, however, the proportion had surged to 569%. The company said the scale of debt accounted for an increase in annual sales, on the one hand due to the size of the company's new bank loans, on the other hand, falling demand led to lower income levels. In recent years, East China CNC Investment in a large number of technical transformation projects, research and development investment and industrial chain expansion, while increasing bank loans. By the end of June 2013, the company's borrowings amounted to about 930 million yuan, including short-term loans of 540 million and long-term loans of 390 million. In the short term, the solvency of the company is very weak and the financial risk is higher. At the end of June this year, the company's liquidity ratio was 0.86, and the speed ratio was 0.36, well below industry level. East China numerical control into the economic downward cycle has begun since 2011, due to the company's CNC large-scale machine tools, such as capital expenditure and supporting operational funds continued to grow, the company increased liquidity loan scale, flow ratio, quick ratio, cash ratio, such as short-term solvency decline significantly. Since 2012, the company has suffered a slowdown in demand for orders and some of the customer orders postponed, and other reasons, the company's inventory occupied liquidity ratio gradually increased, accounts receivable turnover rate also decreased, resulting in rapid rate and cash ratio also decreased significantly. Behind the huge debt is rising financing costs. In the first half of 2013, the company's financial costs amounted to 27.197 million yuan, of which interest payments have 26.972 million yuan. The reason is that, on the one hand, the interest rate of the company obtaining bank loan is higher than the benchmark interest rate floating average 15%~20%, raising the financing cost. On the other hand, since 2012, the downstream growth of fixed assets investment slowed down,Division orders demand growth has been a big negative impact, indirectly squeezing the company's solvency and liquidity capacity. The proposed increase in loans March 1, 2013, East China Numerical control announced the plan, to Dalian Genistein Technology Development Co., Ltd. (hereinafter referred to as "Genistein technology") to 6.40 yuan/share price, directed issue shares 50 million shares, raise funds not more than 320 million yuan, after deducting the handling fees are all used to repay the bank loans. The plan shows that the 2013 East China Numerical control company's loan maturity is above 320 million, including ICBC 28 million, construction Bank 22 million, Bank of communications 40 million, Agricultural bank 97 million, Pudong Fat Bank 30 million, Bank of China 60 million, CITIC Bank 50 million. The financing cost is high, from each bank financing cost, the annual interest rate is the lowest 6.05%, the highest 7.5%. August 9, East China Numerical Control said that the application for Non-public offering has been approved by the SFC, the company said it will be approved by the SFC after the approval of the decision documents issued separately. This fund-raising success or can solve the company's urgent debt repayment, but the decline in operating capacity, still has a great threat to the company's continued ability to operate. At the end of 2010, 2011 and 2012, the book value of the company accounts receivable is 216 million yuan, 246 million yuan, 196 million yuan respectively, and the turnover rate of accounts receivable is 3.33, 2.71 and 1.69 respectively, and it is declining trend of the year. At the end of June 2013, accounts receivable 176 million yuan, but accounts receivable turnover rate is only 0.88. Inventory turnover is more obvious, at the end of 2012 inventory of 569 million yuan, inventory turnover rate of 0.58, the end of June this year, inventory increased to 597 million, inventory turnover fell to 0.23. It is noteworthy that this increase is not simple, there are "additional conditions." After the completion of the fixed increase, the East China Science and technology assets reorganization is a big probability event. Because, according to the "Future reorganization" plan in the Genistein, within 36 months after the release is completed, the company intends to sell the related equity or assets of the machine tool manufacturing business of its NC shares to East China numerical control, including the way to subscribe the CNC non-public offering in east China. If the future reorganization is completed, the actual control person of East China NC will likely change.