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LED Lighting Market Change? Why Linsen Off The Subsidiary?

Aug 24, 2017

Some time ago, the listed led Enterprise Linsen issued a resolution notice, in the announcement prompted to consider the passage of the three bills, one is the "proposed liquidation and cancellation of the subsidiary's motion." Why is this so, is the LED lighting market change?

According to the announcement, based on the company's overall business strategy and planning considerations, in order to integrate and optimize the existing resource allocation, reduce the management cost, improve the overall operating efficiency of the company, the company intends to part of the product sales model from direct marketing to the distribution, for this reason, the company intends to part wholly-owned, holding the sales subsidiary to liquidate and write off, the total net assets of the subsidiary is not expected to exceed 25 million yuan.

I note that this is not the first time that Linsen has made a decision to liquidate and cancel the subsidiary. As early as May 16 this year, Linsen has announced that based on the company's overall strategy and planning considerations, integration and optimization of existing resources allocation, reduce management costs, improve the overall operating efficiency of the company, the company intends to write off the wholly-owned subsidiary Shenzhen Linsen optoelectronic Electronic Commerce Co., Ltd.

It is understood that Linsen business was founded in April 21, 2014, Linsen business of the main businesses for the electrical business, the development of the company led product sales platform. Linsen in the 2014 annual report, said Linsen business to improve the company's sales channels, improve the company's product market share, increase the company's profit growth. However, the fact is not satisfactory, according to the listed company annual report, 2014-2016 years, Linsen business net profit is 112. 870,000 yuan,-329. 830,000 Yuan and-206. 440,000 Yuan, that is to say Linsen business has not been profitable for 3 consecutive years.

Meanwhile, Linsen also on the morning of June 6 this year, said the announcement, to improve management efficiency, optimize the allocation of resources, reduce operating costs, further expand the market, fully implement the long-term development of the company's strategic planning, the company intends to part of the product sales model from direct marketing to the distribution, for this reason, the company intends to part wholly-owned, holding the shares of the sale of subsidiaries to third parties.

From the above three announcements, we can see the wood Linsen whether the liquidation and cancellation of subsidiaries, or the transfer of shares of some subsidiaries, the purpose is to improve management efficiency, optimize the allocation of resources, reduce operating costs.

One is to reduce operating costs. Read Linsen 2015 and 2016 reports: 2015, Linsen realize revenue 38. 8.1 billion, the year-on-year decline of 3%, but its operating costs of spending 30. 6.7 billion, operating costs increased by 3 compared with 2014. 35%. 

In 2016, Linsen realized revenue 55. 200 million, year-on-year growth of 42. 22%, and its operating costs increased to 41. 7.6 billion, year-on-year growth of 36. 17%. 

From its 2015 and 2016 earnings, its operating income increased, while its operating costs soared. It is understood that linsen in technology research and development advantages of one part of the production process innovation, in the traditional led packaging technology based on companies on the product of machinery and equipment, raw materials supply, production process and other aspects of the process of innovation, the company has established a high-performance, process-leading fully automated production lines, effectively improve the equipment utilization ratio, to achieve the effective integration and utilization of the company's production resources.

At the same time, linsen its large-scale production led the company to implement the large-scale purchase of chips, can obtain lower chip prices from suppliers, and establish a good long-term cooperative relationship, stabilize the company chip supply channels and effectively reduce the cost of chip procurement; second, the company's production equipment has now been fully automated production, large-scale production can effectively reduce the cost of product allocation unit labor costs and manufacturing costs, reduce the company's production costs, improve the market competitiveness of products; The large-scale production capacity helps the company to have the high market influence, thus promotes the industry coordinated development.

Although Linsen has taken a lot of measures to reduce manufacturing costs and other operating costs in manufacturing, its operating costs are still rising year after hour. Linsen the sale, liquidation and cancellation of subsidiaries, to a certain extent, to reduce the company's operating costs, improve profits.

In addition, the Linsen liquidation and cancellation of part of the subsidiary is very important because of the company's overall strategy and planning adjustments. Linsen reported that the past Linsen has been focusing on the construction of marketing channels, adhere to the construction of diversified sales channels. In recent years, in the atmosphere of the national electricity business, led traditional enterprises have been involved in the electric business channels, Linsen is no exception. For example, the original establishment of Linsen business is to expand the Linsen led product sales platform.

However, as the cost pressure of electric operators continues to increase, the profit space of the electric business is shrinking, even the profit is difficult to maintain the operators themselves. July 2016, was led electrical business "Dark Horse" product of a lighting failure will reflect the operation of the lighting business problems. According to the product one illumination chairman Liang Ronghua accepts the media to interview the estimate, the electricity commodity card operating cost is roughly as follows: Artificial 11%, Day cat Buckle point 5. 5%, the promotion cost 15%, Express 12%, the After-sale 2%, the financial cost 2%, the water and electricity rents 2%, does the sale on the platform, if does not have 50% above gross profit margin, the electric quotient brand is no way to continue to operate. And Linsen business is also in a 3-year loss of the state, which also brings a certain pressure on the company's operations. 

Based on the current situation of lighting vendors, Linsen intends to sell some products from direct sales to distribution. As a result, with the company's overall strategy and planning adjustment, the first to establish a part of the direct marketing channels and subsidiaries also appear superfluous, not only can not create profits, but will evolve into a development "cumbersome." Based on this situation, Linsen frequent liquidation and cancellation of some subsidiaries is also logical.

Whether it is to establish a channel, set up a subsidiary, or now to some of the subsidiary liquidation and cancellation, are based on the company's overall strategy and planning considerations. Different development period, the enterprise has the different development demand, as long as can conform to the Times development, any benefit enterprise development strategy and the adjustment, all should give the affirmation. For the Linsen of this adjustment, I also hope that it can be in the development of the road, the first to achieve a new breakthrough.

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