Idan Ofer-controlled Ansonia Holdings, which owns 46% of Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI), will immediately inject $25 million into Chinese vehicle venture Qoros, as will Chinese company Chery. The money will be used for working capital. Qoros will later receive $50 million more in the same way from the two companies.
Reports say that the loans to Qoros will be repaid under certain conditions, for example, if Qoros obtains alternative financing, or another party invests in the company or acquires it.
Kenon's share price responded to the news by jumping 16%, boosting the company's market cap to NIS 1.6 billion.
A NIS 1.25 billion loss
Kenon was spun off from Israel Corporation (TASE: ILCO). When the spin-off took place, Israel Corporation granted Kenon a $200 million line of credit designed for support of money-losing Qoros. In order to secure this credit, Kenon granted Israel Corporation a lien on 66% of the shares in its IC Power subsidiary. This entire line of credit was used up by the beginning of April, and Idan Ofer is therefore injecting more cash through Ansonia.
Qoros ended 2015 with $40 million in cash and debt (net of owners loans) amounting to $923 million, while Kenon itself guaranteed $169 of this debt. Qoros had a huge $431 million deficit in working capital at the end of 2015, caused by $662 million in short-term debts. Qoros's net loss climbed 15% to $385 million in 2015 and its equity sank to only $30 million, despite a 69% increase in revenue to $224 million. Between its founding and the end of 2015, Qoros has accumulated $1.25 billion in losses. When the company's annual financial statements were published, management said that due to slower growth in the Chinese auto market, resulting from volatility in the Chinese capital market and slower growth in the Chinese economy, auto market companies had to grant consumers discounts in the second half of 2015, and this trend is expected to continue with even greater force in 2016.
Qoros sold 14,250 new cars in China in 2015, compared with only 7,000 in 2014. Sales in the fourth quarter soared 89% to 4,840, compared with the corresponding quarter in 2014. Sales in the first quarter of 2016, considered the weakest quarter in China, due to the Chinese new year festivities, jumped 97% to 4,900 cars. Despite this impressive sales growth, Qoros is still very far from the sales target of hundreds of thousands of vehicles a year it set when it began operating.
Published by Globes [online], Israel business news - www.globes-online.com - on April 24, 2016
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