Deren plans to sell 18% equity in Liuzhou Shuangfei to focus on the development of its connector main business
Deren announced plans to transfer its 18% equity stake in Liuzhou Shuangfei to Tianjin Tongli for 135 million yuan, and after the transaction, it will no longer hold any equity in Liuzhou Shuangfei. Liuzhou Shuangfei primarily engages in automotive wiring harnesses and faces issues such as intense market competition and fluctuations in customer orders, resulting in significant losses in the first half of the year. This equity transfer will help Deren focus on its core business of connectors, optimize resource allocation, and alleviate financial pressure
According to the announcement from Zhitong Finance APP, Deren (002055.SZ) announced that the company plans to transfer its 18% equity stake in the affiliated company Liuzhou Shuangfei Automotive Electrical Parts Manufacturing Co., Ltd. (referred to as "Liuzhou Shuangfei") to Tianjin Tongli and Ying Sixteen Equity Investment Fund Partnership (Limited Partnership) (referred to as "Tianjin Tongli"), with a transfer price of 135 million yuan. After the transaction is completed, the company will no longer hold equity in Liuzhou Shuangfei.
The announcement stated that Liuzhou Shuangfei's main business is automotive wiring harnesses, with customers concentrated among well-known domestic automobile manufacturers such as SAIC-GM-Wuling and Liuzhou Automobile. In recent years, competition in the automotive wiring harness industry has been fierce. In the first half of the year, Liuzhou Shuangfei faced obstacles in expanding its overseas market, and orders from a key domestic customer fluctuated abnormally, leading to significant impairment pressure on the machinery and raw materials specially procured for the customer; at the same time, the customer had strong cost reduction demands, putting considerable price pressure on Liuzhou Shuangfei. The difficulty in reducing procurement prices for bulk commodities and the volatility in procurement costs due to fluctuating tariff policies for imported materials have resulted in significant losses for Liuzhou Shuangfei in the first half of this year compared to the same period last year, and substantial improvement is unlikely in the second half, putting pressure on the company's annual operating performance.
It is reported that this matter will help the company further focus on the development of its core connector business, optimize resource allocation, and enhance its core competitiveness; at the same time, this transaction will allow for a quick recovery of funds to alleviate financial pressure. The company plans to use the funds for temporarily replenishing raised funds and continuous investment in strategic cultivation businesses, among other purposes
