Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI), controlled by Idan Ofer with a 53.3% stake, is seeking to reduce its exposure to Chinese auto venture Qoros, which it owns in equal shares together with Chinese concern Chery. "Kenon is actively looking for deals that will facilitate its continued support for Qoros, but which will not increase its exposure to Qoros, and will decrease it," Kenon wrote in its third quarter reports published yesterday.
Qoros, which develops and markets hybrid and electric motor vehicles, reported improvement in sales, although the company is far from a level of revenue that will bring it to the operational break-even point, let alone a profit (the company's third quarter financing expenses totaled $9 million). Qoros's third quarter revenue totaled $91 million, up 54%, compared with the corresponding quarter last year, but only 1% more than in the preceding quarter. The company sold 5,833 vehicles in the quarter, 59% more than the 3,667 it sold in the third quarter of 2015. Qoros's sales in October totaled 2,610, up 86%, compared with October 2015.
Koros reported a $70 million net loss on the third quarter, compared with a $75 million net loss in the third quarter of 2015. The company has accumulated $214 million in losses this year and $1.5 billion since it was founded.
Starting in April, Kenon halted its money injections into Qoros, which have since been made through Ansonia Holdings, a private company of Idan Ofer that holds his Kenon shares. Ansonia and Chery injected $100 million in equal shares into Qoros in the second quarter and $44 million more in September, enabling Qoros to keep its head above water and finish the third quarter with $15 million in cash.
In addition to Qoros's debt to its shareholders, it owed the banks $840 million as of the end of the third quarter (Kenon has guaranteed $160 million of this debt), and had $585 million in current liabilities. As a result of its continual losses, Qoros has consistently needed assistance from its shareholders. Kenon injected $200 million into Qoros last year, which Kenon borrowed from fellow subsidiary Israel Corporation (TASE: ILCO) in return for a lien on its IC Power shares.
Qoros is Ofer's second major auto industry investment, following the complete failure of electric car venture Better Place, which Israel Corporation led together with entrepreneur Shai Agassi. Better Place closed down, with the NIS 3 billion invested in it being lost.
IC Power revenue surges
Kenon's main asset is now the IC Power company, which operates power stations in Central and South America and Israel. Kenon owns 100% of IC Power, in addition to its Qoros holding, 32% of Zim Integrated Shipping Services Ltd., and 91% in Primus Green Energy. IC Power posted $502 million in revenue in the third quarter, 49.4% more than in the corresponding quarter last year. The company had a $5 million net profit, compared with $13 million in the third quarter of 2015, due to an accounting write-down and financing expenses, among other factors.
Zim, which is not consolidated in Kenon's financial statements, reported several days ago a 14% slide to $644 million in its third quarter revenue, together with a $7.2 million operating loss, compared with a $34.4 million operating profit in the corresponding quarter last year. Zim posted a $38.7 million net loss, compared with an $11 million net profit in the third quarter of 2015.
The Kenon share price has risen 3% this year, pushing the company market cap up to $550 million. Kenon had $451 million in cash and $85 million in short-term deposits and bonds as of the end of the third quarter. Its equity was $718 million and its balance sheet total was $5.3 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on December 7, 2016
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