Federal’s debt-to-asset ratio reaches 60%

On 14 March, Taiwan-based tyre manufacturer Federal Tire said it will hold a general shareholder meeting in three months. Tyrepress China found that the tyre manufacturer will issue a “Report on losses up to half of the paid-in capital” at the general meeting of shareholders. Federal explains that “the accumulated losses of the company in 2022…reached one-half of paid-in capital”. Official document produced by the company show that Federal’s business situation in 2022 seems to have fallen into a trough.

Documents released during the same period reveal the Federal’s losses. The tyre company lost NT$316 million (about £8.6 million; €9.8 million) in the first half of 2022. From July to December, losses expanded, reaching NT$ 1.04 billion (about £28 million; €32 million). Based on this calculation, the tyre company’s loss in 2022 will be approximately NT$1.356 billion (approximately £37 million; €42 million).

Compared with the huge losses, Federal’s annual operating revenue in 2022 is only NT$1.616 billion (approximately £44 million; €50 million). In other words, the tyre company’s various expenditures in 2022 have reached approximately NT$3 billion.

Another piece of data is more proof of Federal’s current crisis. Financial data show that as of December 31, 2022, Federal’s total assets are NT$10.018 billion (about £270 million; €310 million), and total liabilities are NT$6.038 billion (approximately £160 million; €190 million). The tyre company’s debt has reached 60 per cent of its assets and suffered huge losses in the latest year. Such a business situation may explain why Federal shut down its production base in Taiwan not long ago and let a Vietnamese tyre company manufacture tyres as an international off-take contract tyre partner.

The latest information follows the news that fellow-Taiwanese tyremaker Nankang acquired the management rights to Federal during the last year or so.