BRIEF: MeiDong Auto plunges into the red on impairment charges

4S auto dealer China MeiDong Auto Holdings Ltd. (1268.HK) warned on Monday it expects to report falling deeply into the red last year with a 2.3 billion yuan ($316 million) loss, reversing a profit of 100 million yuan in 2023.

It attributed the loss mainly to the impact of price wars in China’s car market in the second half of last year and macro-economic factors. The company said it will take 2.8 billion yuan in impairment charges on goodwill and dealership rights, which, when combined with 200 million yuan in impairments from the first half of last year, will result in total impairment charges of 3 billion yuan for the full year.

Despite the large size of the loss, the company emphasized its cash flow is healthy, noting its net cash and cash equivalents at the end of last year was higher than a year earlier, and that it recorded positive cash flow from operations. It also redeemed HK$2.75 billion ($354 million) in zero coupon guaranteed convertible bonds due in 2027 issued by Sail Vantage Ltd., a member of the company, before maturity.

Shares of MeiDong opened up 1.5% at HK$2.08 on Tuesday and closed up about 7% by the midday break. The shares are still down 40% from their high over the past six months.

By Lau Chi Hang

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