GAC Group to issue 4b yuan in company bonds

Gasgoo.com (Shanghai March 21) - Guangzhou Automobile Group has announced that it will issue company bonds totaling four billion yuan ($637.42m) this week, China Business News reported today. The bonds will be used to help boost the financial states of subsidiary companies GAC Motor and Guangqi Toyota.

According to GAC Group's official documents, the company's capital assets were valued at 49.52 billion yuan ($7.82b) as of last September, while its total liabilities were valued at 11.53 billion yuan ($1.82b). Long-term liabilities totaled 7.84 billion yuan ($1.24b), higher than 2011's figure. The company's debt asset ratio in 2012 was 33.96 percent, slightly higher than the 32.03 percent reported the previous year. However, analysts point out that the figure is still much lower than the industry average of 60 percent to 70 percent.

Due to anti-Japanese sentiment in response to rising political tensions between China and Japan, the financial performance of GAC's major profit earner, the Guangqi Toyota joint venture, took a major hit last year. According to statistics, GAC Group reported a net profit of just 1.79 billion yuan ($283.15m) over the first three quarters of 2012. The manufacturer's total net profit last year is expected to be 70 percent to 80 percent less than the 4.16 billion yuan ($654.22m) reported in 2011.

Aside from Guangqi Toyota's poor sales performance, GAC's ambitious expansion projects have also been a source of financial pressure. From 2009 to 2012 spent approximately 25 billion yuan ($3.92b) in various projects, including the acquisitions of Changfeng Motor and Gonow Motor and establishment of the Guangqi Fiat JV. Over those three years, GAC issued 6.7 billion yuan ($1.05b) worth of medium term debt notes and procured 11.71 billion yuan ($1.83b) in bank credit.

According to its plans, GAC aims to invest another four billion yuan ($637.41m) over the next two years to introduce new products for its Guangqi Mitsubishi and Guangqi Fiat JVs, as well establish a new research center.