Elco Holdings Ltd. (TASE: ELCO) has sold its air conditioning business in Asia to Singapore's Hong Leong Asia Ltd. (SGX: HLA) for NIS 50 million ($13.5 million), and expects to report a pretax profit of NIS 23 million on the sale.
Elco, controlled by chairman Georg Salkind, sold 80% of Airwell Group's Hong Kong subsidiary, which owns 67% of a venture for the production of commercial air conditioners in China, for NIS 22.5 million, and it sold the Airwell and Fedders brand air conditioners operations and use rights Asia for NIS 26 million.
Elco said that the sales were part of the recovery and restructuring process that it was undertaking at Elco Holland BV and its Airwell subsidiary. This process includes the closing of loss-making plants around the world, a sharp reduction in manpower, and the sale of non-core activities of Airwell. Elco has already sold its holdings in a Chinese company that owned an air conditioners factory for NIS 55 million in the fourth quarter of 2011, and sold its rights in the air conditioner manufacturing operations in Italy to Sweden’s Systemair A/B (OMX: SYSR) earlier this year. Elco expects to report a profit of NIS 31 million (€4.3 million) on the Italian factory sale. Elco kept its rights to the land on which both factories are located.
The global economic crisis hit the air conditioning market hard, including sales by Airwell. Elco lost NIS 59 million on Airwell in 2011, and NIS 428 million altogether since 2009. The NIS 55 million sales of the Italian operations last year helped Elco achieve a net profit of NIS 27 million, compared with a net loss of NIS 32 million in 2010.
Earlier this month, Psagot Investment House Ltd. estimated the value of Airwell at €30 million, saying, "To the best of our understanding, the commercial air conditioning market has not recovered from the global economic crisis that began in 2008, due to the lack of commercial building starts. The home air conditioning market began recovering several quarters ago, but last summer was poor, and the European economic condition does not bode well for the industry in the short term."
Elco's share price fell 2% today to NIS 23.31, giving a market cap of NIS 616 million.
Published by Globes [online], Israel business news - www.globes-online.com - on April 15, 2012
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