Automaker Yulon Motor Co’s (裕隆汽車) debt and profitability are expected to improve over the next two years, aided by the sale of its electric vehicle brand Luxgen Motor Co (納智捷) for NT$787.6 million (US$25.02 million), Taiwan Ratings Corp (中華信評) said yesterday.
The cash inflow should help Yulon improve its debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) ratio to between 2 times and 2.5 times next year, from between 2.5 times and 3 times this year, the ratings agency said in a report.
The ratio is expected to drop further to between 1.5 times and 2 times in 2027, it said.
Photo courtesy of Yulon Motor Co
The disposal of Luxgen should also partly help enhance Yulon’s profitability and lower its operating burden, given that Luxgen reported a net loss of NT$253 million for the first three quarters this year, the report said.
The ratings agency expected Luxgen to break even next year or in 2027.
Yulon’s board of directors on Friday last week approved a proposal to sell all of the company’s Luxgen shares to Foxtron Vehicle Technologies Co (鴻華先進), which is 43.83 percent owned by Yulon. That means Yulon would still indirectly hold a major stake in Luxgen after the transactions.
Hon Hai Precision Industry Co (鴻海精密) has a 45.62 percent stake in Foxtron. The deal is expected to be completed in the first quarter of next year.
Yulon Motor is projected to see a dip of 35 percent to 40 percent in production this year, Taiwan Ratings said.
However, its production volume is forecast to expand by about 75 percent to 80 percent next year, as the company continues adopting a multi-brand, original equipment manufacturing strategy and its introduction of Foxtron’s new model B and other models in North America and Oceania markets, the agency said.
The automaker’s major customers for contract manufacturing services include Foxtron and Yulon Nissan Motor Co (裕隆日產), which distributes Nissan vehicles in Taiwan.
Increased production volume and continued efforts to improve production efficiency would enable the company to maintain its EBITDA margin at 9 percent to 10 percent next year and in 2027, compared with 10 percent to 12 percent this year and 8.8 percent last year, Taiwan Ratings said.
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