Hong Kong – Foamer Sinomax will raise CNY 152.5m (US$ 21.6m) by selling its stake in Chengdu Xingang. Chengdu Xingang is a mainland Chinese flexible foam maker and conversion company.
The sale is to its JV partner which will make three cash payments over two years. Liu Jiaming will buy the 51% of the shares of the JV that he does not already own.
Sinomax said that it was selling the stake in the business because profits fell from RMB3.97 m in 2017 to RMB1.19 m in 2018. This fall was due to tougher competition, high materials costs and a variable local market for its products in china.
When the dust has settled, Sinomax said that it will use the proceeds for working capital and to strengthen its balance sheet.
Sinomax paid CNY 87.1m for the 51% stake in 2016. At the time it said the deal fitted its strategy of buying and collaborating with attractive companies. And that it would help to reinforce its position in the Chinese polyurethane foam market.