Weike Essence After Broken Arm: Spin Off And Transformation Of Textile Business Frustrated

On May 28, Weike essence (600152. SH) announced the progress of transferring the equity of subsidiary Ningbo Weike Cotton Textile Co., Ltd. On May 24, 2018, the company transferred 100% of the equity of Ningbo Weike Cotton Textile Co., Ltd. (hereinafter referred to as "Weike cotton textile") by auction. According to the company's management's investigation and market analysis, combined with the opinions of the auction company, the initial reserve price refers to 10% of the net asset appraisal price on the evaluation benchmark date of January 31, 2018, i.e., RMB 134.03 million Yuan.

After two years of losses, the old textile enterprise began the road of survival by breaking off its arms, stripping off its original assets and transforming to the research, development, manufacturing and sales of lithium-ion batteries. However, the road has just begun, but it has suffered another setback.

Run into a loss

As one of the largest domestic textile enterprises, Weike essence has not had a good life in recent years. As of the end of 2017, the total net assets of the company amounted to RMB 13.358 million and the total net assets as of the end of 2017 were RMB 13.358 million and rmb-2.708 million respectively.

According to the financial report, in 2017, the business income of Weike essence textile business accounted for 23.05%; the business income of textile business decreased by 29.36%; during the reporting period, the production capacity of Weike essence home textile plate was about 1.5 million pieces, and the equipment utilization rate was 60%; the production capacity of clothing industry was about 1.5 million pieces, and the equipment utilization rate was 50%; the production capacity of printing and dyeing processing plate was about 28 million meters, and the equipment utilization rate was 100%.

From 2012 to 2017, the company shut down the enterprises with no hope of turning losses, disposed of machinery and equipment, and reduced 6100 employees, resulting in the rise of short-term comprehensive costs. At the same time, in order to avoid peer competition and fulfill the company's commitment, the company divested its real estate business and import and export business from listed companies.

According to the announcement, Zhenjiang cotton textile, which Weike essence plans to divest, was established on August 10, 2004 with a registered capital of 80 million yuan. Its business scope covers the production of yarn, thread, cloth and supporting post-processing products; sales of self-produced products and defective products and wastes produced in the manufacturing process of the above products; textile equipment leasing, installation and technical consulting services. Weike Jingjing, Jiangsu Textile Group Co., Ltd. and KB duzhu Co., Ltd. respectively hold 75%, 18.75% and 6.25% equity of Zhenjiang cotton textile.

As of December 31, 2017, the total assets of Zhenjiang cotton textile were 55.9661 million yuan, the total liabilities were 170 million yuan, and the net assets were - 114 million yuan; in 2017, the operating income was 121.927 million yuan, and the net profit was - 29.2318 million yuan. As of March 31, 2018, Zhenjiang cotton textile had total assets of 54.6386 million yuan, total liabilities of 171 million yuan, and net assets of - 117 million yuan. As of March 31, 2018, its operating income was 1.0763 million yuan, and its net profit was - 2.6899 million yuan.

Setbacks in transformation

Weike has directly held 100% shares of the company since 2016, and has directly purchased 100% shares of the company since 2016.

But the deal didn't deliver the expected benefits to VECO essence. At that time, the holding shares of Vico and Vico, which held about 71% of the holding shares of the company, were purchased by the shareholders of Longke Yongke and Weike for about RMB 4.0 billion. The evaluation value of 100% equity of Vico battery is 914 million yuan, and the evaluation value-added rate is 247.84%.

At the time of acquisition, the counterparties promised that the net profits attributable to the parent company after deducting non recurring profits and losses in 2017-2019 were not less than 50 million yuan, 70 million yuan and 90 million yuan respectively. According to the announcement of Weike essence, Weike battery is expected to generate a net profit of about 59.97 million yuan in 2017. However, due to the existence of receivables involving litigation of 84.0999 million yuan, Weike battery may lose 24.13 million yuan, and the lawsuit mainly comes from its customer Jinli communication.

Weike battery has submitted a complaint to the people's Court of Beilun District, Ningbo. The defendants are Dongguan Jinzhuo, Dongguan Jinming, Shenzhen Jinli communication equipment Co., Ltd. (hereinafter referred to as "Jinli communication"), Shenzhen Jinli Technology Co., Ltd. (hereinafter referred to as "Jinli Technology") and Liu Lirong.

It is reported that Dongguan Jinzhuo is a wholly-owned subsidiary of Jinli communications. Jinli communication is the controlling shareholder of Dongguan Jinming and Jinli Technology. Jinli communication holds 92% of the equity of Dongguan Jinming and 95% of the equity of Jinli Technology. Liu Lirong is the legal representative, chairman and general manager of Jinli communications, Dongguan Jinming and Jinli Technology. Since 2017, Jinli's debt crisis has continued to ferment, and Jinli suppliers have been implicated in it. The performance of listed companies whose suppliers are Jiangfen magnetic materials and orphi technology have also been greatly affected in 2017.