Watma is deep in debt

Shenzhen pingshan district shenyu science and technology park next to the ju longshan no. 7 road, is located in the south gate of the watmar company. Here is the main import and export of the company's transport of goods, loading goods in and out of the trailer frequently busy scene no longer. The country's top three power battery maker has been operating at a low rate since around the Spring Festival, with some factories shut down.

In April this year, watmar's debt crisis brought many upstream suppliers into the vortex, including A number of a-share companies and neeq companies. The chain reaction was still brewing. "I don't know if there are any unexploded 'mines'." A supplier source said. At present, watmar and its parent company kenpower are taking various measures to save themselves.

Positive self-help

For those familiar with the industry's development, the crisis has come as no surprise.

By the time the crisis hit, Mr Watma had recognised a strategic error and started tweaking his business model. Through the development of energy storage battery business, enter the momentum of better development of the ternary battery market and other means to respond. At the beginning of this year, the chairman li yao revealed that in the first half of this year, the first ternary battery production line will be built and the design scheme of square battery cell and PACK production line will be completed within this year. And increase the research and development investment in micro grid energy storage, standby power supply of communication base, and energy storage products of state grid.

In fact, the development of energy storage battery has become a last resort. "Inventory has had a deadly effect. The original judgment is optimistic, so the inventory is on the high side. Among them, quite a few batteries do not meet the energy density requirements stipulated by the subsidy. In this case, the downstream vehicle manufacturers do not intend to purchase, or will not get the corresponding subsidies. At present, the approach adopted by watmar is to develop the business of energy storage battery and convert this part of inventory into energy storage battery for sales. Although profit margin to a certain extent, but can effectively reduce inventory.

However, due to the energy storage policy, lithium battery price, power and other factors, lithium battery storage is still not widely used. According to the research institute of high industry and technology (GGII), the output of lithium battery energy storage market in 2017 was about 3 percent. 5GWh, up 13% from a year earlier; Output reached 5.5 billion yuan, up 7 percent year-on-year. According to GGII, the industrial critical point of the lithium battery energy storage market is approaching, and 2018 will be the beginning year of the rapid development of China's energy storage industry.

"The market for energy storage batteries is far from ready, and it is difficult to say whether they will be able to absorb the inventory. And with more than one company grabbing the pie, it's hard to know how much of it watmar will have. "Moko said.

Despite missing out on the best opportunity to capture the ternary battery market, watma said it would invest more resources to develop ternary batteries in the future and quickly develop a competitive high-nickel ternary power battery to make up for the absence of the company in the ternary battery market. In 2018, watmar plans to launch high-nickel terna-lithium batteries with energy density up to 220Wh/kg and cycle times up to more than 2,000 times, and start 21700-4 at the same time. 0Ah ternary lithium battery production line, to achieve mass production.

But the crisis appears to have started earlier. Therefore, watma and Kennedy can only take measures to save themselves.

To solve the current debt problem, watmar has set up a task force to take four major measures, according to Kennedy. It includes strengthening the collection of receivables, considering the introduction of factoring companies for some long-term receivables of public transport companies, carrying out debt transfer and obtaining cash flow.

Secondly, actively negotiate with suppliers to settle the current debts due in the form of offsetting the inventory of materials, batteries, vehicles and other fixed assets with the sales of fixed assets. There is now consensus of some 18. 4.8 billion yuan, accounting for 84 percent of shenzhen watma's accounts payable due. 80%, involving 104 suppliers.

For bank loans, financial institutions, such as the import and export bank of China shenzhen branch, industrial and commercial bank of zheshang bank shenzhen branch, shenzhen branch three lead arranger 18 financial trade institutions established walter tamar financial creditor's rights trade commission (hereinafter referred to as "consortium"), a consortium of the units to the creditor's rights to maintain the current financing situation, give shenzhen walter time to introduce strategic investors, to protect the common interests of all financial trade creditors. Strive for the existing bank 5.6 billion yuan loan extension of one year, to ensure that interest payments on schedule.

In addition, active introduction of strategic investors, enhance liquidity.

Their composition

Since the Spring Festival, the operating rate of watma has been low, and some factories have been shut down. In reply to the inquiry from the shenzhen stock exchange, jianruihuaneng revealed that the company's orders were reduced and its inventory was large. Before the Spring Festival, all factories combined could produce 3 million batteries per day, while after the Spring Festival, only 600,000 batteries per day were produced.

As of the end of March 2018, the company's operating rate was only 20 percent, according to the announcement. Part of the production subsidiary suspended production, material demand reduction. The payment terms of suppliers are more stringent, and only under the condition of full payment can the normal supply be maintained.

As one of the top three power battery manufacturers in China, watma has more than 100 upstream suppliers. The debt crisis not only endangered itself, but also triggered a chain effect of upstream and downstream.

"The big suppliers have largely stopped supplying, and a few smaller suppliers or ones with big customers are still supplying raw materials. I don't want to lose this customer. An industry insider who has worked with watmar for years told China securities journal.

Located in pingshan new district, shenzhen, fuzhengda technology co., LTD., only 1 km away from watercode, is mainly engaged in PCB surface mount (SMT) and new energy electronic product assembly. According to the 2016 annual report of jianrehuaneng, this enterprise with more than 300 employees ranked as the largest supplier of watercode in 2016. According to a senior fuzhengda technology executive, the company is still supplying watercode, even though it owes a lot due to the long-term relationship between the two companies.

But big suppliers, especially some listed companies, are starting to turn a deaf ear. Upstream suppliers were already aware of the risks before the debt crisis broke out in April. "" in December 2017, we stopped supplying [the company's] code. It was a very important client, but it didn't feel right at the time. A water code upstream material supplier told reporters. Changyuan group is one of the suppliers of watercode diaphragm. According to the management of changyuan group, in November 2017, we have suspended the supply of diaphragm to watercode and made a provision for bad debt at 10% of the commercial acceptance bill of the latter in the 2017 statement.

It is worth noting that, unlike the public disclosure of the top five suppliers in the 2016 annual report, the specific names of suppliers were not disclosed in the 2017 annual report. "It may be deliberate, concerned about the impact on upstream suppliers, many of which are listed companies," said an industry source.

But the risk is exposed gradually, fu Lin seiko bears the brunt. According to the annual report, the company's asset impairment loss in 2017 was about 1 percent. 2.1 billion yuan. Among them, bad debt loss is 1. 8 billion yuan, inventory decline loss of about 15. 660,000 yuan, goodwill impairment loss of about 12.17 million yuan. The loss of asset impairment directly impacted the company's profit of that year, and the total profit of the 2017 consolidated statement of fulin seiko was offset by 1. 2.1 billion yuan.

All sorts of signs show, fu Lin seiko's huge asset impairment loss and jian ruiwo can closely related. Rich seiko disclosed in 2017, the final accounts receivable balance in the top five largest customers, the firm can revell and its subsidiaries holds four seats (including shenzhen walter) battery Co., Ltd., Shaanxi walter new Energy Co., Ltd., Shaanxi J&R Optimum Energy Co., Ltd, jingzhou city, walter battery Co., Ltd.), accounts receivable total of about 10. 1.7 billion yuan, accounting for the company's top five accounts receivable combined ratio of nearly 90%, according to the 10% ratio of bad debt provision amount 1. 01.7 billion yuan.

The goodwill impairment loss of 12 million yuan is also related to jianrewo energy. The annual report shows that fulin seiko reserves 12.17 million yuan to deal with the goodwill impairment risk of sublimation technology, a wholly-owned subsidiary. Sublimation technology is mainly engaged in the research and development, manufacturing and sales of new energy lithium battery anode materials.

Fulin seiko disclosed on April 17, 2017, sublimation technology customer concentration is high, the main customer watma to its formation of a large amount of receivables. The company shall make corresponding provision for impairment of assets in accordance with the accounting standards for enterprises. Watmar accounted for 89 percent of sublimation's total sales during the same period. 55 percent, 2017 sublimation technology performance commitment completion rate is only 66. 65%.

Godsend material was also affected. According to the data, in 2014, tianci materials ranked the fourth largest supplier of watercode, with a purchase amount of 17.97 million yuan. In 2015 and 2016, it withdrew from the top five suppliers of watercode.

According to the 2017 annual report, tianci material is still affected. As of December 31, 2017, the total amount receivable by tianci materials and its subsidiary jiangxi Ed from watma and its subsidiary shaanxi watma new energy co., LTD is 1. 500 million yuan. Where, accounts receivable 1785. 870,000 yuan, notes receivable 1. 3.4 billion yuan. In March 2018, the two parties signed an agreement that watmar and related parties would offset the payment by selling the inventory, and the estimated value of the company's purchase inventory is 13,865. 780,000 yuan (excluding tax).

According to the annual report disclosed by changyuan group on April 24, the company made provision for bad debts at 10% of the final commercial acceptance bill of shenzhen watma battery co., LTD., hunan watma new energy co., LTD., jingzhou watma battery co., LTD., and shaanxi watma new energy co., LTD.

The crisis

A bad debt of 13 million yuan means a huge loss to a neeq company with annual revenue of less than 50 million yuan, which may even be a matter of life and death.

The annual report shows that in 2017, hengjun technology, a new third board company, achieved operating income of 48.31 million yuan and net profit of 1.03 million yuan. Located in wuhu, anhui province, hengjun technology has only 96 employees and two wholly-owned subsidiaries, junzhuo commerce and junda nonferrous. Among them, junda nonferrous is mainly engaged in the production and sales of nickel belt, which is the main revenue source of hengjun technology, contributing more than 60% of the operating income of hengjun technology in 2017.

The importance of junda nonferrous to hengjun technology is self-evident. This time, junda is caught in the vortex of capital chain rupture of shenzhen watma battery co., LTD. (referred to as "watma"), a subsidiary company of jianruihuaneng.

On April 4, 2018, junda nonferrous applied to the court for pre-litigation property preservation, and froze the bank deposits of shenzhen watma battery co., ltd. or seized and seized the property with the same value within 13 million yuan.

Since 2016, watmar has been hengjun's biggest customer. For two consecutive years, watma's sales revenue accounted for more than 45% of the total sales of hengjun technology. In 2017, the accounts receivable of hengjun technology were as high as 1939. 880000 yuan. Among them, watma is 1090. 660,000 yuan, is the company's largest arrears of customers.

"So far this year, the company has supplied some goods to watma, and accumulated accounts receivable for watma is about 13 million yuan." If the money is not collected, it will have a major impact on the company's business.

The freeze, which has not been announced by hengjun technology and watmar, is just the tip of the debt crisis at watmar. On April 1, jianrehuaneng announced that the company has been overdue debt situation, overdue debt 19. 9.8 billion yuan, mainly notes payable and bank loans, facing the claims of creditors, the company faces the risk of debt repayment, which has an impact on daily operations.

Affected by this, the next day after the resumption of trading jian ruiwo can fall by the limit. The debt crisis has caused a series of complications.

On the evening of April 2nd, cervonen announced that 13 bank accounts belonging to the company and its subsidiary, watmar, had been frozen by the court due to a civil dispute over debts that could not be repaid. The total amount involved was 6,254 yuan. 220000 yuan. Since then, watma kept coming out of the asset freeze news. On the evening of April 13, the company announced that eight new bank accounts belonging to watma had been frozen for 78 dollars. 270000 yuan. In addition, a few fixed assets of watma were seized by shenzhen pingshan district people's court.

Then came the "performance makeover". On the evening of April 13, cervonen announced to revise the 2017 performance report, and it planned to adjust the amount of bad debt provision, goodwill impairment provision and other financial data. It is expected to make a profit of 5. 5% in 2017. 2.2 billion yuan changed to a loss of 33. 500 million - 37. 500 million yuan. According to the annual report disclosed by cervonen on April 27, the net profit of the parent company was -36. 8.4 billion yuan, down 966 percent year-on-year. 82%. In the first quarter of this year, Canon's performance continued to decline, with operating income and net profit falling 59 per cent year-on-year. 88% and 225. 86%.

The debt crisis has also disrupted the company's plans to restructure its assets. The proposed takeover of part or all of Altura, an Australian exchange-listed company, has been affected. The company said that the cash transaction amount of the material assets reorganization was huge, the company raised funds by itself to solve the difficulties, and it had not issued any legally effective acquisition documents, so there was a risk that it could not be implemented.

Model battle

The underlying cause of the debt crisis, which has spread from subsidiaries to listed companies and then to the entire supply chain, is not simple.

"The strategy that the company has developed before has gone wrong." Since 2016, watma has significantly expanded its production scale, said zhong mengguang, vice President of watma. "I wanted to reduce production costs and increase market share in a volume way. The result has been to move too fast, too aggressively, and now there is financial difficulty.

According to its 2017 annual report, as of the end of the reporting period, there were 11 power battery production bases (including watmar) in China. Among them, 7 production bases have been put into production. Mr Chung conceded that expansion provided capacity guarantees but brought greater financial pressure.

In the view of meng guang zhong, the adjustment of new energy vehicle subsidy policy is the fuse of the crisis.

At the end of 2016, the subsidy policy for new energy vehicles was adjusted, adding the regulation that "non-individuals who buy new energy vehicles can only receive the subsidy if their operation is over 30,000 kilometers". "Since the introduction of the policy, watma has been greatly affected and the payback period has been extended for at least one and a half years." According to zhong, it will take about a year for new energy vehicles to cover 30,000 kilometers. In addition, the subsidy application process and the payment collection arrangement of downstream vehicle manufacturers will take at least half a year. "The failure to accurately anticipate the impact of policy changes during rapid expansion is indeed a strategic mistake."

In the meantime, zhong mengguang emphasizes among them the industry develops a factor. "" the cash flow problems that watma has experienced are widespread in the industry. The entire power battery industry is facing "" long payment days" "and collection pressure, accounts receivable and accounts payable double high situation is common.

Li yao, general manager of jianrehuaneng and chairman of watmar, agrees. Ms li said the company's bank loans were short-term, such as six-month or one-year loans, while the new energy vehicle business could take five years to generate revenue. "Short loans and long investments" cause a lot of stress.

"The subsidy adjustment and the nature of the industry set off the mine," says one industry insider. Midstream battery makers struggled last year. In the middle and lower reaches of the car more strong, power battery enterprises in order to obtain orders, generally under long payment days pressure. At the same time, affected by the decline of new energy vehicle subsidy policy, vehicle manufacturers will cost pressure upward transmission. Coupled with the crazy rise in raw material prices, power battery manufacturers are under pressure at both ends.

In 2017, the debt of the top three domestic power battery companies increased significantly. Byd's debt totaled 1,181 billion yuan in 2017, according to its annual report. 4.2 billion yuan, up 3.1 percent year-on-year. 8%. The total debt at the end of the ningdean-era 2017 was 231. 9.2 billion yuan, an increase of more than 80 percent. But watma's growth rate was significantly higher than those of its two rivals, with debt rising nearly 95 per cent in 2017.

"The failure to fully attribute the detonation of debt mines to prior expansion. Under the background of subsidy decline, expanding market share for large-scale production, so as to lower costs in line with the industry development trend, is also the main strategy of the leading enterprises in the middle reaches. "Byd and ningde times were thinking the same way. Why didn't we have a debt crisis?"

The problem also stems from watmar's business model, where the "reverse customization" model has been called into question. Under this mode, watmar alliance signs strategic cooperation agreements with local governments, and watmar invests in local factories and obtains government orders. After getting the order, the operating company, new wo capacity, will order the vehicle from the oems, and the designated vehicle must carry the battery provided by watmar innovation alliance.

In June 2017, jianreweng clarified the "reverse customization" mode and denied the existence of "reverse customization" in the product sales process of watma, and there was no hidden association between the new shipping capacity and the listed company. But doubts remain.

"In the early days, there were clear advantages to this business model. The sum of state and local subsidies is greater than the cost of power batteries. As long as the operating terminal can sell the car and control the operating cost, the closed loop can work well. Second, a large number of government orders can help enterprises in the short term to rush up the volume, quickly seize the position in the industry. A long-term focus on the new energy industry brokerage analysts noted.

From the end of 2016, the subsidy continued to decline. On December 30, 2016, the four ministries and commissions jointly issued the "notice on adjusting the fiscal subsidy policy for the promotion and application of new energy vehicles". The adjusted policy limits the local fiscal subsidy to a certain extent, and the local fiscal subsidy shall not exceed 50% of the central fiscal subsidy. In addition to fuel cell vehicles, the central and local subsidy standards and upper limits for all types of vehicles from 2019 to 2020 will be reduced by 20% on the basis of the current standards. It also requires non-individual users to apply for subsidies for new energy vehicles, and the cumulative mileage must reach 30,000 kilometers (except special vehicles for operation).

In February 2018, the subsidy policy was adjusted again, reducing the subsidy for new energy vehicles with low range and increasing the subsidy for new energy vehicles with high range. Adjusted operating mileage requirements at the same time, the classification, the private purchase of new energy car, job transfer vehicle (including sanitation trucks), party and government organs, public transport, civilspecial airport floor vehicles such as apply for subsidies do not make operating mileage request, other types of new energy vehicles subsidies running mileage request to adjust to 20000 km.

In this model, says Mr Moko, the pressure falls on the operational side. The operating company has to keep placing orders for the whole model to work smoothly. "Before the policy adjustment, some of the vehicles in the new capacity were idle. In addition to the delay of subsidies, the payback cycle is prolonged. Meanwhile, some vehicles at the operating end cannot run, and it is difficult to meet the operating mileage requirements. The whole closed loop is broken.

"It's not that the business model is wrong. To be more precise, the model is less resistant to retreat and compensation, and watma's early judgment on the policy was too optimistic. A new energy vehicle industry pointed out.

The page contains the contents of the machine translation.