Seamount Technology Company Limited

Foshan Lighting’s Net Profits in 2015 Hurt by Investor Lawsuit

2016-03-29 09:34:42 Seamount Technology Company Limited Read

Investor lawsuits have caused Foshan Lighting’s net profits to plummet 79.93% in 2015 to RMB 53 million (US $8.15 million), while annual revenue dropped 6.26% YoY to RMB 2.88 billion, according to a company statement.

The LED company cited three main reasons behind its plummeting revenues. Investor lawsuits was one of the top reasons cited for the heavy losses incurred last year, Chinese courts ruled Foshan Lighting had to pay in total RMB 132 million in compensations. 

The company was embroiled in a lengthy and costly lawsuit over the past two years involving nearly 1,000 investors for presenting misleading and dishonest financial statements.

Last year the company also reported an assets impairment valuing RMB 89.47 million. Financial losses were further escalated by lowered retail prices that resulted in decreasing gross margin and reduced net profits.

Despite these many challenges, Foshan Lighting is expanding R&D investments in 2016 to develop new products. The company is also seeking new retail channels through e-commerce to improve its revenue income. Other strategies the company plans to implement to reduce manufacturing costs is collaborating with other manufacturers, purchasing supplies from OEMs, and increasing automated manufacturing to lower its reliance on manpower.

In the same company statement, Foshan Lighting observed traditional luminaire market continued to shrink in 2015, but LED lighting market had continued to grow. But LED lighting market growth slowed down in the past few years, especially in the end-market application sector which has a low entry level. There are obvious oversupply issues, and manufacturers will need to restructure through acquisitions to expand. Uncompetitive SMEs will gradually exit the market, ushering the entire industry into a new restructure and merger phase.

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