Sentury self-financing Spanish tyre factory shortfall

On 17 January, Sentury said it will adjust its financing plan through the stock market and specifically non-public offering of shares. After the adjustment, the tyre manufacturer will obtain no more than 2.8 billion yuan (about £330 million; 380 million euros), which is far lower than the 4 billion yuan (about £480 million; 540 million euros) proposed in the previous plan.

Sentury attributed the reason for the adjustment of the financing plan to the smooth progress of the financing work, the maximisation of the interests of shareholders, the relevant provisions of laws, regulations and regulatory documents, as well as the changes in the current market environment and the actual situation of the company. On 18 January, when interacting with investors, the secretary of Sentury’s board of directors said: “The board of directors fully considered and respected the suggestions of many investors and took the initiative to reduce the scale of funds raised and the number of issuances”.

According to the data, the purpose of Sentury’s financing is to fund the building of its Spanish factory, which is of great significance in the strategic development of this tyre manufacturer. Sentury said the benefits of investing in Spain’s annual production of 12 million tyres include “enhancing brand power, improving technology, optimising sales layout, and ensuring supply chain security. At the same time, (the Spanish factory) is expected to consolidate Sentury’s competitive advantages and achieve long-term, stable and sustainable development”.

According to the plan, the total investment of Sentury’s Spanish project is 523 million euros (because of the large exchange rate fluctuations, this investment range is about 3.7 billion to 3.9 billion yuan). Therefore, even if Sentury invests all the 2.8 billion yuan raised in this financing into the Spanish factory, there is still a gap of about 1 billion yuan (about £120 million; 140 million euros) in the project that needs to be filled. In this regard, the tyre company explains that it will self-finance to provide the remainder.

Sentury did not disclose exactly how it will carry out that “self-financing”. However, Sentury announced on 17 January that it plans to use its funds of no more than 1.5 billion yuan (about £180 million; 200 million euros) to invest in financial management to increase the company’s income. Through this announcement, the tyre manufacturer seems to be showing the outside world that its cash flow is stable and can fill the financing gap of the Spanish factory.

In addition, the tyre maker did not disclose when its funds would be invested in the Spanish and Moroccan factories. At the end of December, Sentury said it would invest in a tyre factory in Morocco with “self-financing” of US$297 million (about £240 million; 270 million euros). It is worth noting that Sentury has not disclosed the specific construction time of the Morocco factory. According to public information, the overall planning of the Sentury Morocco project only has a construction period of 18 months, with a production capacity of 3.6 million tyres in the first year of operation and 6 million tyres in the second year of operation.