TCL Multimedia Technology Holdings Ltd declared its European
unit TTE Europe SAS insolvent on Thursday, bringing the
Huizhou-based maker of consumer electronics one step closer to
shedding its loss-making European operations.
TCL Multimedia, a part of the TCL Group, said in a statement on
Friday that the France-based TTE Europe had failed to come to terms
with creditors over outstanding claims despite "extensive"
negotiations. The company was unable to repay its debts, and so,
according to French law, it had to file for insolvency.
"(The decision) is a significant step towards (TCL Multimedia's)
recovery and turnaround in the future," the company said in a
statement.
TCL formed a joint venture with the French electronics firm
Thomson in 2004 and took over the latter's TV businesses, including
its Thomson and RCA brands.
However, due to a failure to catch up with the worldwide
preference for flat-panel TV sets and a lack of due attention to
its European business at the early stages, the joint venture
quickly became a burden on both TCL Multimedia and its
Shenzhen-listed holding company, TCL Corp.
According to preliminary results for last year released on April
30, TCL Multimedia's revenue fell during the period by 10 percent
to about HK$29.1 billion, but losses expanded by almost five times
from HK$330 million to HK$1.53 billion. The company will release
its final results on Thursday.
The heavy losses have dragged TCL Corp into the red for the past
two years, so according to Chinese regulations, the company had a
special ticker identifying it as special treatment appended to its
trading code. The indicator meant TCL Group's stock would be
de-listed if it failed to turn a profit this year.
On May 17, Thomson sold 175 million shares in TCL Multimedia,
thereby lowering its stake in the Chinese firm to 10.99 percent
from 15.47 percent.
The company's shares on the Hong Kong stock exchange fell by
1.75 percent to HK$0.56 on Friday. In the past year, the price has
fallen by more than half.
TCL Chairman Li Dongsheng said earlier that returning the
European business to the black had become his top priority in the
second half of last year and that the company would achieve that
goal this year.
In the past year, TCL closed its factories in Europe,
restructured its distribution network and invested resources in the
booming LCD TV industry.
Zhou Guofei, an analyst with Zhengjiang Lijie Investment
Strategy Consulting Co, said in a research note that TCL's rough
patch would come to an end with the restructuring of the European
business and perhaps a turnaround of its losses.
In the first quarter, TCL Corp reported net profit of 30 million
yuan, compared with a net loss of 190 million yuan in the same
period last year.
(China Daily May 26, 2007)