Caixin
Oct 24, 2019 08:09 PM
BUSINESS & TECH

Shenzhen-Listed Smartphone-Component Maker Bailed Out by City Government

In the third quarter this year, Ofilm reported a profit of 159.5 million yuan after it swung to a profit in the second quarter. The company reported losses of 257 million yuan in the first three months this year. Photo: IC Photo
In the third quarter this year, Ofilm reported a profit of 159.5 million yuan after it swung to a profit in the second quarter. The company reported losses of 257 million yuan in the first three months this year. Photo: IC Photo

The government of Nanchang, capital of East China’s Jiangxi province, is coming to the rescue for an electronics supplier that has come under financial pressure after its smartphone-making clients slashed orders amid an industry downturn.

Shenzhen-listed Ofilm Group Co. Ltd. said it has agreed to sell 434.1 million shares, or 16% of the company for 3.5 billion yuan ($494 million) to Nanchang Industrial Holdings Group Co. Ltd., an investment and financing company backed by the municipal government of Nanchang, according to the company’s filing (link in Chinese) with the bourse on Wednesday.

The announcement comes after Nanchang Industrial made an advance payment of 1.5 billion yuan to Ofilm in May, when the two parties agreed a stock transfer plan without disclosing further details.

Ofilm manufactures micro-camera and touch-screen components for smartphones and laptops worldwide, and counts the likes of Huawei and Apple as clients. In the first six months of this year, the company’s profit dropped 97.2% to 21 million yuan, with the company’s earnings report blaming a slowing smartphone market that has shaved profit margins.

Overall global smartphone shipments declined 2.3% year-on-year in the second quarter this year, following a drop of 6.6% in the first quarter, according to industry tracker IDC.

Following sluggish demand, the Nanchang city government has previously stepped in to ease the company’s financial burden. In May, government-backed Nanchang Municipal Public Group Co. Ltd. said it planned to buy 51% of two of its subsidiaries and to pay 1 billion yuan before the end of May as part of the tranche. In the same month, another subsidiary of Ofilm raised 490 million yuan from Nanchang High-Tech Investment Group.

The government assistance has helped boost the company’s bottom line. In the third quarter this year, Ofilm reported a profit of 159.5 million yuan after it swung to a profit in the second quarter. The company reported losses of 257 million yuan in the first three months this year.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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