Compal Electronics Inc (仁寶) yesterday said it has changed its procedures with LeEco (樂視), shipping products only after receipt of accounts receivable from the Chinese smartphone maker, in a bid to reduce its client’s overdue debt.
“The amended transaction method is to ensure the scale of overdue accounts receivable will not expand,” a Compal investor relations official said by telephone.
The remarks followed a report by Chinese online financial news Web site Laohucaijing.com that LeEco’s financial performance issues have snowballed.
The report said LeEco has outstanding debts with more than 10 of its supplies, of which Compal and China’s Truly Opto-Electronics Ltd (信利) have the greatest exposure, with a combined debt of US$700 million.
In a filing with the Taiwan Stock Exchange, Compal said LeEco owes it a total of NT$8.29 billion (US$260 million) in accounts receivable as of September, with more than half, or NT$4.29 billion, overdue between one and 180 days.
Despite the overdue debt, Compal said it holds key components from LeEco that are worth more than NT$4.29 billion, suggesting that it could withhold the components if LeEco fails to repay its debt.
However, Compal booked a bad debt of NT$360 million for the July-to-September quarter in accordance with Taiwan’s accounting regulations, the filing said.
Compal recently negotiated a repayment plan with LeEco, which began paying the overdue accounts receivable last week, the official said, adding: “The repayment process was smooth.”
Compal believes that LeEco’s financial problems are only temporary, the official said, adding that Compal thinks LeEco could solve the issues soon, as long as its products receive warm market responses.
On Nov. 9, Compal president Ray Chen (陳瑞聰) told reporters that he thinks LeEco chairman and CEO Jia Yueting (賈躍亭) is a visionary with a track record for strong execution.
Jia might have expanded LeEco too quickly, leading to the temporary cash flow problem, Chen said, but added that he believes the problem can be solved.
Pegatron Corp (和碩), one of LeEco’s smartphone assemblers, yesterday declined to comment on whether its collaboration with the Chinese firm had changed due to its financial situation.
“Pegatron does not comment on specific clients. All we can say is that our collaborations with clients are under strict risk control,” a Pegatron investor relations official said by telephone.
On Nov. 8, Jia wrote a lengthy open letter to his employees, saying that the company is running out of cash due to a head-long rush into electric cars and the smartphone business.
Jia pledged to reduce his salary to 1 yuan (US$0.14) and slow the company’s expansion to a more moderate pace.
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