2007'02.01.Thu
Xinhua Far East Downgrades Dongfeng Electronic Technology Co. Ltd to BB+ Issuer Rating, Rating Outlook Changed from Stable to Negative

March 21, 2006

HONG KONG, March 21 /Xinhua-PRNewswire/ -- Xinhua Far East China Ratings today downgraded Dongfeng Electronic Technology Co. Ltd ("Dongfeng Tech" or "the Company", SH A 600081) from BBB- to BB+ domestic currency issuer credit rating. The rating outlook is also changed from stable to negative. The rating action was prompted not only by Xinhua Far East's concern about the intensifying competition in China's auto market and the resultant pressures on the Company's OEM auto parts business, but also by Dongfeng Tech's lagging market position, with its comparatively small scale, weak R&D capabilities and loose cost controls. The downgrade also incorporates the Company's unstable cash flow status, impaired debt repayment capability and rising liquidity risk. One positive factor preventing the Company from receiving a lower rating is Dongfeng Motor Corporation's ("DFM") support for the Company. DFM is willing and able to continue propping up the Company in the short run; however, there are uncertainties in respect to its support in the long run as DFM itself faces even fiercer competition. The Company's rating outlook is changed to negative considering these uncertainties. While the Company's sales to related companies accounted for more than 40% of its total sales annually from 2001 to 2005, during the same period, CAGR of Dongfeng Tech's turnover was lower than that of both related downstream automakers and the China auto industry average. In Xinhua Far East's view, the benefits from related parties will diminish, with internal purchases becoming increasingly market-oriented as automakers get squeezed by excess capacity and price wars. Meanwhile, Xinhua Far East notes that deteriorating debt positions and increasing liquidity risks weigh heavy on the Company. By the end of 2005, Dongfeng Tech's gross debt to total capital had risen to 52.3% from 26.1% in 2002, and its debt repayment ability had become significantly impaired with profit drying up over the previous years. Its EBIT interest coverage dropped from 8.2 in 2002 to 1.7 in 1H05 and turned negative for the whole year of 2005. Current ratio recorded at 0.77 at the end of 2005. The Company announced plans to improve its performance through R&D enhancement and efficiency improvement, and Xinhua Far East expects the Company will keep looking for opportunities to boost the process and expand its product lines by setting up new joint ventures and M&As. Xinhua Far East believes capital expenditure will rise, resulting in an even tighter cash flow status for the Company. Dongfeng Electronic Technology Co. Ltd. is one of the most significant auto part manufacturers in China. Two ultimate shareholders of the Company are Dongfeng Motor Corporation, the third largest auto group in China, and Nissan Motor Company. The Company operates as an OEM supplier to Dongfeng Motor Corporation. In 2004 and 2005, Dongfeng Tech's turnover recorded at RMB816 million and RMB904 million respectively, in which sales to related companies accounted for more than 40%. Dongfeng Tech produces such parts as combined auto meters and related sensors, oil supply systems, brake systems and casts. For the rating report summary, please visit http://www.xinhuafinance.com/creditrating . 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 http://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 . For more information, please contact: Hong Kong Joy Tsang Corporate & Investor Communications Director, Xinhua Finance Tel: +852-3196-3983 Tel: +86-21-6113-5999 Tel: +852-9486-4364 Email: joy.tsang@xinhuafinance.com US 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
PR
Post your Comment
広告
ブログ内検索
アーカイブ
カウンター