On June 4, Zoomlion (000157, stock) announced that combined with the company's business financing demand in 2012, the company plans to apply to the relevant banks for credit (credit) and financing business, the total scale of not more than 140 billion yuan. However, the 140bn line of credit is already well above Zoomlion's Rmb82.1bn market capitalisation.
Wang Bo, investment consultant of CITIC Jiantou Securities, believes that the reason why Zoomlion has to apply for such a large credit extension is essentially because the company's cash flow is tight and the company needs to supplement certain cash flow in order to continue to expand the market.
In response, Liu Pengfei, assistant to the chairman of Zoomlion, said that this is just an application for a credit line, which is different from financing. Zoomlion did not have a financial crisis, and the application for a credit line of 140 billion yuan is a reflection of the company's strength and credit.
With the emergence of irrational promotion methods such as "low down payment", "zero down payment" and "price reduction in a form" in the construction machinery industry, capital problem has become an open topic in the industry. Leading enterprises in the construction machinery industry, including Sany Heavy Industry (600031 shares), Zoomlion and XCMG, are all faced with high accounts receivable scale. It has become a common behavior for enterprises to apply for credit (credit) and financing business from banks.
According to our reporter's understanding, in March 2012, Sany Heavy Industry also issued a notice to apply for 2012 annual credit lines from relevant banks, with a total credit scale of 136.8 billion yuan. In addition, Xugong and Liugong also submitted similar applications to the shareholders' meeting, with quotas of 50 billion and 96 billion respectively. So far the four major construction machinery enterprises will obtain more than 400 billion bank credit.
140 billion credit
According to Zoomlion's announcement, it has applied for bank credit (credit) and financing business with a total scale of 140 billion yuan, including working capital loans, mortgage business, financial leasing, various types of guarantees and other bank-related business.
Shen Ke, Secretary of the Board of Directors of Zoomlion, said that the number of credit lines the company applies for should take into account the fact that the bank credit line has a certain amount of deposit and may double the use of credit lines in overseas business, and the competitive strength and brand popularity of the enterprise.
The reporter checked Zoomlion's annual report found that in 2011, the company's main business revenue was about 46.3 billion yuan, an increase of 44% compared with 32.1 billion yuan in 2010, while the receivables in the same period increased from 6.9 billion yuan to 11.6 billion yuan, an increase of 68%, accounting for 25.17% of the main business revenue. At the same time, the company's cash flow is negative.
That, the analyst said, reflects the fact that the company sold a lot of machinery and didn't get paid for it. The company's aggressive sales strategy has something to do with this. The low-down-payment finance lease model has helped Zoomlion rapidly expand the market and boost revenues, but it has also exacerbated the company's cash flow squeeze.
In the past two years, with the intensive real estate regulation and control policies, the operating conditions of downstream customers of construction machinery enterprises have deteriorated, which, on the one hand, leads to the weakening of the demand for machinery products from downstream customers, and on the other hand, increases the risk of large amounts of receivables under the financial leasing mode. In this situation, the company will have to continue its aggressive sales strategy and expand markets at the expense of cash flow if it wants to maintain high revenue and profit growth.
At present, the domestic sales of construction machinery are mainly financial leasing and bank mortgage, customers need to pay 20% ~ 30% of the down payment to withdraw the equipment. However, with the increasing competition in the market, the "zero down payment" mortgage became the craziest sales model in 2011, and most manufacturers, including leading enterprises in the construction machinery industry, adopted this sales model.
Aggressive Selling Incentive
Under the stimulation of irrational promotion means such as "low down payment", "zero down payment" and "disguised price reduction", receivables surge and cash flow strain has become increasingly evident in the whole construction machinery industry.