2007'02.01.Thu
Xinhua Far East China Ratings Downgrades the Issuer Rating of Ningbo Bird to BB-

April 05, 2006

HONG KONG, April 5 /Xinhua-PRNewswire/ -- Xinhua Far East China Ratings (Xinhua Far East) today downgraded the issuer credit rating of Ningbo Bird Co., Ltd. (`Bird' or `the Company', SH A 600130) from BB+ to BB-. Its rating outlook remains negative. The downgrade was prompted by Bird's poor performance in 2005 and its limited financial flexibility in what is an increasingly challenging operating environment. Xinhua Far East anticipates it will be difficult for Bird to improve its performance and enjoy upside potential in the medium term given the tough market environment. The conditions in China's handset sector worsened in 2005, with intensifying competition as a result of stagnant growth in domestic sales, heavy inventories, the release of new brands, and the inflow of Original Design Manufacture (ODM) products in the sector. Heavy price cutting is the main tool used to promote sales, while manufacturing costs are rising as a result of consumer demand for more sophisticated mobile handsets functions. R&D and promotional costs have also risen as a result of reduced fashion cycle for cellular phones. The operating conditions are even more challenging for domestic cellular phone makers. International brands continue to take market share in China and, in 2005, they held 59.4% of the market, according to Ministry of Information Industry figures. As a result of localized product designs, competitive pricing, and stronger technology, international brands have not only consolidated their share of the high-end segment, but have also broken into the mass/medium-end market. The downgrade action also reflects Bird's poor operating results and its limited ability to withstand a market downturn. Although Bird remains in a leading position, when compared to its domestic peers, its turnover fell 5.3% yoy in 1-3Q05, while its EBIT margin declined to negative 4.0% for 1-3Q05 from 2.7% in 2004. Meanwhile, the Company also announced huge loss estimation for full-year 2005. The downgrade for Bird also reflected deteriorated financial flexibility. Although Bird reduced its inventory in 2005, the effect has had little overall effect given its mounting inventory, which has accumulated over the years. Moreover, with handset fashion changing quickly, the market value of the remaining inventory is questionable. When excluding inventory (which accounted for 41.4% of current assets by September 2005), Bird's current asset to current liability ratio was just 0.78 at that time. In addition, Xinhua Far East expects the upside potential for Bird is limited in the foreseeable future. While exports increased to 43.9% of Bird's turnover in 1H05, the generally lower profit margin in overseas markets will only reduce the Company's overall profitability. The Company is facing stronger international brands, which have superior distribution channels internationally. The approaching 3G era is unlikely to bring Bird much benefit, given its limited investment exposure, low market demand in the initial stages, and the fact there are different distribution channels for 3G handsets. About Xinhua Far East China Ratings Xinhua Far East China Ratings (Xinhua Far East) is a pioneering venture in China that aims to rank credit risks among corporations in China. It is a strategic alliance between Xinhua Finance (TSE Mothers: 9399), and Shanghai Far East Credit Rating Co., Ltd. Shanghai Far East became a Xinhua Finance partner company in 2003 and the first China member of The Association of Credit Rating Agencies in Asia in December 2003. Capitalizing on the synergy between Xinhua Finance and Shanghai Far East, Xinhua Far East's rating methodology and process blend unique local market knowledge with international rating standards. Xinhua Far East is committed to provide investors with independent, objective, timely and forward-looking credit opinions on Chinese companies. It aims to help investors differentiate the credit risks among the corporations in China, thereby, cultivating their awareness and promoting information disclosures and transparency in China market. For more information, see www.xfn.com/creditrating. About Xinhua Finance Limited Xinhua Finance Limited is China's unchallenged leader in financial information and media, and is listed on the Mothers board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY). Bridging China's financial markets and the world, Xinhua Finance serves financial institutions, corporations and re-distributors through four focused and complementary service lines: Indices, Ratings, Financial News and Investor Relations. Founded in November 1999, the Company is headquartered in Shanghai with 21 news bureaus and offices in 18 locations across Asia, Australia, North America and Europe. For more information, please visit http://www.xinhuafinance.com. About Shanghai Far East Credit Rating Co., Ltd Shanghai Far East Credit Rating Co., Ltd. is the first and leading professional credit rating company with comprehensive business coverage in China. It is an independent agency established by the Shanghai Academy of Social Sciences with the mission to develop internationally accepted standards for capital market in China. The company is a pioneer in conducting bond-rating business in China. For years, it has been authorized by the Shanghai branch of the PBOC to undertake loan certificate credit rating. Since establishment, it has rated over 1,000 corporate long-term bonds and commercial papers, based on the principles of objectivity, fairness and independence. The company has also maintained over 50% market share in the loan certificate-rating sector in Shanghai for three consecutive years. With its strong local presence and knowledge, it provides investors with unique and the most insightful credit opinion. For more information, see http://www.fareast-cr.com. About Ningbo Bird Co., Ltd. Ningbo Bird Co., Ltd. is principally engaged in cellular phone manufacturing. Its largest shareholder is Ningbo Electronic Information Group Co., Ltd. which holds a 28.125% stake in the Company. In 2004, Bird's turnover was RMB10.246 billion, while shipments were reported as 13.657 million, of which 3.377 million were exported. For the rating report summary, please visit www.xinhuafinance.com/creditrating. For more Information, please contact: Joy Tsang Corporate & Investor Communications Director Xinhua Finance Tel: +852-3196-3983 +8621-6113-5999 +852-9486-4364 Email: joy.tsang@xinhuafinance.com David Leeney Taylor Rafferty (IR/PR Contact in US) Tel: +1-212-889-4350 Email: david.Leeney@taylor-rafferty.com SOURCE Xinhua Far East China Ratings
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