The mask business is so difficult!
There were twists and turns in BYD’s US$1 billion mask order, and now Kingfa Technology (600143.SH), a company listed on the Shanghai Stock Exchange, has encountered the dilemma of delays in receiving the initial payment for a nearly US$1 billion contract.
On June 10, Kingfa Technology announced that the buyer, the American company, has not paid the upfront payment despite the delay. There is significant uncertainty about whether the transaction can be performed normally in the future, and there may be a risk that it cannot continue to perform normally.
Affected by this news, Kingfa Technology opened lower today, with a decline of 1.15% as of press time.
said It took 3 days to pay, but there has been no movement for almost a month!
As the new coronavirus affects the world, masks have become hard currency.
According to official WeChat news from Qingyuan City, Guangdong Province, in March this year, Guangdong Kingfa Technology began to switch to mask production and planned to build 56 fully automatic mask production lines, which were already under construction at the time. At the same time, Guangdong Kingfa Technology has also invested in the production of melt-blown cloth, the raw material for masks. Once fully put into production, the daily output can reach 15 tons.
On the evening of May 17, Kingfa Technology announced that the company’s subsidiary Guangdong Kingfa Technology Co., Ltd. (hereinafter referred to as Guangdong Kingfa) signed a KN95 mask sales contract with a company in the United States, with an amount of US$975 million. The expected net The profit accounts for more than 50% of Kingfa Technology’s net profit in 2019.
Kingfa Technology’s operating income in 2019 was 29.286 billion yuan, a year-on-year increase of 15.68%; net profit was 1.245 billion yuan, a year-on-year increase of 99.43%. In other words, if the contract is successfully fulfilled, Kingfa Technology will earn a net profit of more than 600 million yuan from this order.
Spurred by this news, the stock price of Kingfa Technology hit the daily limit on May 18, with a transaction volume of 888 million yuan that day, closing at 13.34 yuan per share.
However, it turns out that making money is not easy. This large order of nearly 1 billion US dollars encountered problems in the upfront payment.
According to the goods sales contract signed by Kingfa Technology and the other party, this purchase order stipulates that the buyer shall pay the order amount to Guangdong Kingfa within 3 working days from the date when the buyer receives the proforma invoice provided by Guangdong Kingfa. 40%. As of the evening of May 17, Guangdong Fafa has provided the buyer with a proforma invoice.
The picture and text have nothing to do with each other, the source of the picture is: Photo Network
In addition, from the effective date of the contract to March 31, 2021 According to the purchase order, Guangdong Fafa will deliver the goods to the buyer in weekly installments after the buyer pays the upfront payment of the agreed proportion of the order, and will complete the delivery of the goods agreed in this purchase order within 3 months.
However, according to Kingfa Technology’s subsequent announcement, the buyer’s American company has been unable to pay the upfront payment.
On the evening of May 22, Kingfa Technology disclosed the progress of the order and announced that the company received the “Certificate” from the buyer on May 21, 2020, Eastern Time, on May 22, 2020, Beijing time. Letter” and the “Confirmation Letter” issued by the buyer’s entrusted lawyer. Due to the fund collection and large payment process, the buyer’s upfront payment of 40% of the order amount will be slightly delayed. After receiving the letter, the company responded by agreeing to its application for delayed payment and requiring it to complete the payment as soon as possible.
Now, on the evening of June 10, Kingfa Technology announced again that as of now, the company has not received the upfront payment from the buyer. The buyer reported that the transaction is planned to be paid through a trust fund, and the funds are collected and Large payments involve authorization procedures and legal compliance reviews, which impact payment progress.
Fafa Technology stated that the buyer has not paid the upfront payment despite the delay. There is significant uncertainty about whether the transaction can be performed normally in the future, and there may be a risk that it cannot continue to be performed normally.
A US$1 billion mask order is highly risky
It is worth noting that Kingfa Technology once stated , but the American company, the counterparty to this contract, has not had business dealings with the company before. The counterparty of the contract did not disclose its detailed financial data due to factors such as trade secrets, nor did it provide performance guarantee measures for domestic entities. Now that many places around the world are in the midst of an epidemic, it is difficult for companies to send personnel to the United States and possible destination countries or regions to conduct on-site investigations, making it difficult to make complete, detailed, and accurate judgments on the performance capabilities of contract counterparties.
In addition, the goods in this transaction are anti-epidemic items, and they are all sold to overseas markets. The final destination may involve multiple countries or regions. The changes and trends of the epidemic in the relevant destination countries or regions are currently unavailable. It is accurately predicted that the development of the epidemic in relevant countries or regions may have an impact on this transaction.
At the same time, many countries or regions around the world are currently affected by the epidemic. The demand and supply market for global anti-epidemic items are also constantly changing. There are uncertainties in the competition between market entities and changes in market conditions in destination countries or regions. , which may have an impact on the performance of the contract.
Kaffa Technology once said that the order amount of this transaction is relatively large, and it will be produced in batches, delivered in batches, and settled in separate orders. The order is expected to last for three months. Affected by the epidemic or market factors, customers may subsequently propose to adjust or cancel some orders, and modify shipments.time etc. The progress of sales and contract fulfillment will affect the company’s actual sales and payment collection status.
Netizen: Is the big order going to be sold?
It is understood that Kingfa Technology was established in 1993 and is mainly engaged in the research and development, production and sales of new chemical materials. Its products include modified plastics, completely biodegradable plastics, etc. Kingfa Technology was listed on the Shanghai Stock Exchange in 2004, with a current total market value of 33.2 billion yuan. As of the end of the first quarter, the total number of shareholders was 127,900.
Regarding the twists and turns of Kingfa Technology’s nearly US$1 billion deal, investors also have different opinions.
Some investors said that it has been almost a month since the contract was signed and they have not received the upfront payment yet, and they are worried that this big contract may be lost.
There are also relatively optimistic investors who said that the company’s announcement shows that the orders have not been yellow yet, and that good things are hard to come by.
Some investors said that it is too difficult to do business with American companies.