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Appliance firm plans 2.8b yuan private placement

By Ding Qingfen (China Daily)
Updated: 2009-06-23 08:01

Suning Appliances, China's second largest consumer electronics retailer, said it plans to raise funds worth 2.8 billion yuan ($409.79 million) through a private placement, in a bid to expand its network into second-tier cities and strengthen its logistics services.

The company said it would issue no more than 200 million new shares to private investors. Zhang Jindong, Suning's chairman, will purchase shares worth 250 to 350 million yuan, or about 9 to 12 percent of the total.

Among the proceeds, 1.4 billion yuan will be used to build and develop 250 new stores in second-tier cities; about 1 billion yuan will be injected into setting up five logistics centers in Chengdu, Wuxi, Xuzhou, Tianjin and Chongqing, and into extending the Beijing logistics base. The rest will be used as working capital, according to the corporate announcement.

Related readings:  Suning to open 220 stores in 2010  Suning likely to snap up 30% of Laox  Suning's net profit up 48% in 2008  Gome to raise HK$3.24b via bonds, shares

The Chinese household appliance sector is expected to pick up this year, stimulated by the recovery of the economy and the preferential policies of the government, including the rebate policy. The sector had witnessed a slowdown in growth during the last quarter of 2008.

"What is for sure is the sector will be on a steady growth track," said the corporate announcement.

According to Wu Meiyu, a household appliance analyst from Guosen Securities, the industry will bottom out later this year, and whole year growth is likely to be 6 percent.

Suning's business is showing signs of recovery. As the company's financial report shows, from January to March, Suning's profit surged by 10.21 percent from a year earlier to 475 million yuan, on sales of 12.66 billion yuan, up 0.16 percent.

The figures marked the first quarterly growth in corporate profit compared with the previous quarter. Suning's profit fell to 610 million yuan during the third quarter of 2008, from 670 million yuan in the second quarter. It was further down to 468 million yuan in the fourth.

Suning opened 27 new stores during the first quarter, in three second-tier cities.

The company said it would enter 70 cities and open 200 additional stores this year, up from the existing 850 at the end of 2008. Corporate executives said expanding beyond the first-tier cities was one of the major goals for Suning in 2009.