BenQ Posts $600M Loss, Plans to Sell Non-Core Assets
By Colleen Taylor -- EDN, October 24, 2006
It was bad news in Q3 for Taiwan-based consumer electronics maker BenQ Corp. The company said it lost nearly $600 million over the first nine months of the year, and has launched a debt reduction plan and will sell some of its of non-core long-term investments and assets.
The company is now embarking on a strategy to recoup losses it said stem from its effort to profit from the cell phone business it acquired from Siemens.
For Q3, the company's core business recorded sales of $1.2 billion (40.7 billion new Taiwan dollars), excluding sales attributable to its BenQ Mobile German subsidiary, which it acquired from Siemens. For the first nine months of 2006, the company's core business recorded sales of $4.6 billion (153.5 billion TWD) and $591 million (19.7 billion new Taiwan dollars) in net loss.
In a large-scale recovery attempt, the company said this week its board has approved resolutions pertaining to disposal of assets. Specifically, the board approved the sale of BenQ's Jiandong plant and associated land in Gueishan Industrial Park to Daxon Technology Inc. Additionally, the board also authorized future disposal of the shares that BenQ holds in Gallant Precision Machining Co. Ltd.
The Siemens-related losses have gotten attention, as well. BenQ said its board of directors resolved in September to discontinue capital injection into the company's BenQ Mobile German subsidiary. Its German subsidiary then filed for insolvency protection as a result. The company has been working on a restructuring strategy for months now; earlier this year, Motorola acquired a Denmark-based radio system research and development center from BenQ.
"In keeping with conservative accounting principles we have made a one-off provision of 11.8 billion TWD [$354.5 million], including receivables due from the company's BenQ Mobile German subsidiary. Our priority will be to rebuild sales channels and boost customer confidence," Eric Ky Yu, BenQ's senior VP of finance, said in a statement. With no more funding commitment into the BenQ Mobile German subsidiary, "we are looking to lower the company's debt level over the next few quarters by implementing a proactive debt-repayment plan.
"With the debt-reduction plan that we're implementing, including monetization, I am confident we will quickly improve financial ratios, strengthen balance sheet, lower interest expense, and free up additional cash for further growth," Yu added.
