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)