Geely Group's 70 billion debt debts to Volvo project funds are tight

Li Shufu, chairman of Geely Group, is trying his best to promote Geely.

Recently, Geely Group announced the launch of a financing plan for 1 billion yuan of corporate bonds. The Geely Group stated that the proceeds from the fund-raising will be used for fixed-asset investment projects, repayment of bank loans, and funds necessary to supplement group operations.

Relevant data show that the current total debt of Geely Group has reached 71 billion yuan, and the issuance of 1 billion yuan in bonds this time means that Geely Group, which has a tight capital chain, will face more severe debt repayment pressure. As the related examination and approval work of Volvo Cars' plant projects in China's three places is gradually progressing, the subsequent investment of more than 10 billion yuan will further “bake” Li Shufu.

Huge debt

According to the “China Business” reporter from the inside of Geely Group, of the 1 billion yuan of funds raised through the issuance of bonds, 700 million yuan is used for the annual output of 300,000 automatic transmission projects and an annual output of 250,000 sets of automotive electronics. The R&D centers of key parts and components such as systems and transmissions have invested RMB 100 million to repay bank loans and RMB 200 million to supplement company operating funds.

Yin Daqing, vice president of Geely Group, said that the 1 billion yuan fund is a “timely rain” for Geely and can quickly supplement the funds needed for Geely’s development. However, he also admits: “only The issuance of 1 billion yuan worth of bonds is to strictly control the debt ratio of enterprises. Although there are many funds, the burden on debt is also higher, which is not conducive to the normal development of the company."

It is clear that Yin Daqing has realized the danger of the current huge amount of debt of Geely Group.

According to the consolidated debt assets table disclosed by Geely Group in the recent three years, the total liabilities of Geely Group soared from 4.87 billion yuan in 2008 to 71.07 billion yuan in 2010, and the total debt ratio was 73.4%. The major reason for such a huge increase in total liabilities is mainly due to the fact that after Geely completed the acquisition of Volvo in 2010, it also inherited the huge debt of Volvo Car. Before the acquisition of Volvo, the total debt of Geely Group in 2009 was 16.05 billion yuan. The increase in debt after a year is mainly due to the acquisition of the Volvo project.

According to the financial data of Geely Group in 2010, of its 71.07 billion yuan in liabilities, current liabilities were 47.97 billion yuan, non-current liabilities were 23.09 billion yuan, and the proportion of current liabilities was too high (generally speaking, within a business cycle or within one year The liabilities that need to be repaid are current liabilities, and the repayment period is more than one year or one operating cycle is non-current liabilities. Current liabilities are risky financing methods). Geely Group hopes to use the issuance of one billion yuan long-term bonds to improve the company’s debt structure and improve the company’s capital operation efficiency. However, it is obvious that there will be a slight decline in the company’s debt structure with only one billion yuan of long-term bonds. In the long run, the huge debt that the Geely Group shoulders will also deepen once again.

An analyst from CITIC Bank stated that the high balance sheet of corporate assets will inevitably affect the ability of companies to repay their debts. This has also caused difficulties for related companies to further borrow from banks.

Funding gap

The Geely Group, which already bears huge amounts of debt, is now again “bearing debt,” which has raised doubts about the smoothness of the follow-up process of the Volvo project.

Recently, the environmental impact assessment of the Volvo Daqing plant project has been passed. After the final approval by the National Development and Reform Commission, the Daqing plant project with an investment of 4.576 billion yuan will require the Geely Group to immediately use real money and silver to advance. Previously, the reporter during the investigation of Volvo Daqing project in Heilongjiang Province, close to the National Development and Reform Commission and the Heilongjiang Development and Reform Commission revealed that in the Volvo Daqing project, the relevant departments' attitude is that Daqing local government can not afford to pay, the capital needs Geely Group self-raised .

In addition, it has been determined that the Volvo Engine Factory in Jiading District of Shanghai will have a planned investment of 3.21 billion yuan; the same Volvo R&D center project in Shanghai will have a planned investment of 1.699 billion yuan; and another Volvo OEM project in Chengdu is planned. Invested 3.2 billion yuan. Comprehensive investment information shows that the total investment has reached nearly 13 billion yuan only in Volvo projects in Chengdu, Shanghai, and Daqing.

Apart from Daqing, it stated that it no longer injects capital into Volvo projects. So far, government departments in Shanghai and Chengdu have not pledged capital injection to Geely Group. Therefore, in addition to Volvo will undertake part of the investment, most other project construction funds need Geely Group to solve. It is understood that the time points for the completion and production of the Volvo projects in the above three locations were all set for 2013, which also means that the Geely Group must find a breakthrough in funding sources from now on.

However, where does the Geely Group, with its debt amounted to RMB 71.07 billion, come from where to raise money?

Due to the high debt, it is difficult for Geely Group to open the door of the bank again; in fact, the problem of high debt ratio will also increase the difficulty of financing for the Geely Group in the stock market. Compared to FAW Cars (000800.SZ), Changan Automobile (000625.SZ), Dongfeng Motor (600006.SH), Shanghai Automotive (600104.SH), and Jiangling Motors (000550.SZ), which are listed on China A-shares. The rate (up to about 60%), the debt ratio of Geely Group's 73.4% has been high, which is unfavorable to the financing prospects of its listed company Geely Auto (00175.HK). “If Geely Group continues to borrow on capacity expansion and new construction projects, and it is unable to effectively control the rising debt ratio, it is bound to worry investors,” said Liu Feng, an analyst at Southwest Securities.

Myth is difficult

For a time, Geely Group, which has incurred more than 700 billion yuan in debt, has fallen into trouble in the development of the huge amount of funds needed for the Volvo project. What is more depressing for Geely is that the performance of its original automotive business is not going strong.

As early as March of this year, Geely Automobile announced its 2010 results, the market level has raised doubts about the profitability prospects of Geely Group. At that time, Geely Automobile's 2010 annual report showed that the company achieved sales of 415,800 vehicles in 2010, an increase of 27% year-on-year. However, last year, the average growth rate of China's passenger vehicle market was 34%. Geely Automobile failed to outperform the market. Therefore, on the day of the annual report, Geely Automobile's share price plummeted by 5.66%.

Recently, Geely Automobile announced the sales situation in the first half of 2011. According to the announcement, Geely Automobile sales decreased by 4.6% in May from May, and the total sales volume in the first half of the year was 213,000, which only completed its annual sales target. 44.5%. On the second day of the announcement, Geely Automobile's share price dropped more than 3%. Now, the overall situation of the Chinese auto market in the second half of the year is generally not optimistic, sales are blocked, and the profit level of Geely Group will also be greatly reduced.

However, the speed of Volvo's project can't be slowed any more. Relevant data show that in the first half of 2011, Volvo sold more than 21,000 vehicles in China, an increase of 36% compared to the same period of last year. However, such sales and increase are not as good as those of BMW, Mercedes-Benz and other competitors. In the first half of this year, BMW was China achieved sales of 121,600 units, a year-on-year increase of 60.8%, and Mercedes-Benz achieved sales of 95,000 vehicles in China, a year-on-year increase of 59.0%. If the speed of the Volvo project in China is slowed down due to funding problems, the Volvo brand will be further and further away from BMW and Mercedes at the same time of loss.

In 2010, the Geely Group of "Volunteer" Volvo made the whole world lament that Chinese auto companies staged the myth of mergers and acquisitions with Xiaoda. One year later, when faced with the huge funding gap in the development of the Volvo brand, Li Shufu once again staged funds. myth?