Goodwill is like a sharp blade hanging on the head of listed companies and has become the “performance killer” of many listed companies. This time, the protagonist is Nbtm New Materials Group Co.Ltd(600114) (600114). On January 6, Nbtm New Materials Group Co.Ltd(600114) disclosed that the annual performance reduction announcement in 2021 showed that due to the performance of the acquired subsidiary Shanghai Fuchi Tech Co., Ltd. (hereinafter referred to as “Shanghai Fuchi”) did not meet the expectations, the provision for goodwill impairment of 65 million to 85 million yuan was withdrawn, and the company expected the attributable net profit to decline 66% to 100% during the reporting period. Looking at the performance of Nbtm New Materials Group Co.Ltd(600114) in recent years, the net profit attributable to Nbtm New Materials Group Co.Ltd(600114) has declined for two consecutive years from 2018 to 2020. It is worth mentioning that on that day, Nbtm New Materials Group Co.Ltd(600114) “flash received” the inquiry letter from the Shanghai Stock Exchange, requiring the company to explain whether there was insufficient and untimely impairment of goodwill in the early stage.
decline in performance due to impairment of goodwill
At the beginning of 2022, more and more companies began to “spoiler” the company’s performance in 2021, and Nbtm New Materials Group Co.Ltd(600114) is also one of them. However, the performance of Nbtm New Materials Group Co.Ltd(600114) will disappoint investors.
On January 6, Nbtm New Materials Group Co.Ltd(600114) disclosed that the annual performance pre reduction announcement for 2021 showed that the attributable net profit of the company during the reporting period is expected to be about 0 yuan to 30 million yuan, a decrease of 57.5 million yuan to 87.5 million yuan compared with the same period of the previous year, a decrease of 66% to 100%; It is estimated that the net profit after non deduction in 2021 will be about – 51 million yuan to – 26 million yuan, a decrease of 60.59 million yuan to 85.59 million yuan compared with the same period of last year, a year-on-year decrease of 175% to 247%.
Nbtm New Materials Group Co.Ltd(600114) disclosed the “culprit” of the performance decline in the performance forecast, which is that the company has accrued a goodwill impairment provision of up to 85 million yuan.
It is understood that Nbtm New Materials Group Co.Ltd(600114) acquired 75% equity of Dongguan Huajing Powder Metallurgy Co., Ltd. (hereinafter referred to as “Dongguan Huajing”) and Shanghai Fuchi by acquiring equity in 2019 and 2020 respectively. Due to business merger not under the same control, according to the difference between the merger cost and the fair value share of identifiable net assets of Dongguan Huajing and Shanghai Fuchi on the purchase date, Goodwill of 64.9173 million yuan and 44.93525 million yuan were formed respectively. Dongguan Huajing became a wholly-owned subsidiary of Shanghai Fuchi in 2021. Shanghai Fuchi and Dongguan Huajing have become an unquantifiable whole.
Nbtm New Materials Group Co.Ltd(600114) said that during the reporting period, due to the profound changes in the international political and economic pattern and the shortage of chips, Shanghai Fuchi experienced a decline in the number of orders and the suspension of projects, and the business situation did not improve substantially, resulting in a significant decline in the business performance of Shanghai Fuchi in the current period and affecting its future profitability. According to the analysis of the future business performance of Shanghai Fuchi, Goodwill shows signs of impairment. Based on the above comprehensive judgment, the company plans to combine Shanghai Fuchi and Dongguan Huajing as an asset group for goodwill impairment test. After careful judgment, the amount of goodwill impairment provision to be withdrawn in this period is 65 million yuan to 85 million yuan.
Shortly after Nbtm New Materials Group Co.Ltd(600114) disclosed the performance forecast, Shanghai Stock Exchange “lightning” issued an inquiry letter to Nbtm New Materials Group Co.Ltd(600114) . In view of the above situation, Shanghai stock exchange required Nbtm New Materials Group Co.Ltd(600114) to supplement and disclose the specific calculation process and relevant basis for the initial goodwill recognition of the acquisition of Shanghai Fuchi and Dongguan Huajing; Main financial data and changes of Shanghai Fuchi and Dongguan Huajing in each reporting period since the acquisition; The specific circumstances of this goodwill impairment and the adequacy and rationality of the impairment amount; Combined with the cumulative investment and income of the underlying assets, explain whether the early acquisition decision is prudent and whether the directors, supervisors and senior managers are diligent and responsible.
In addition, the Shanghai stock exchange requires Nbtm New Materials Group Co.Ltd(600114) to supplement and disclose the top five customers and sales of Shanghai Fuchi, the time point and specific reasons for the decline of the above orders and the suspension of the project, whether it is sustainable, and the specific impact on its future operating performance; Combined with the business performance of Shanghai Fuchi and Dongguan Huajing, as well as the specific situation of goodwill impairment test and provision for goodwill impairment in each period since the acquisition, it explains whether there is insufficient and untimely goodwill impairment in the early stage and whether it complies with the relevant provisions of accounting standards.
In addition, Nbtm New Materials Group Co.Ltd(600114) said that the performance forecast has included the amount of compensation for the relocation of Shanghai Fuchi. On December 30, 2021, Shanghai Fuchi Tech Co., Ltd. signed the agreement on early termination of lease relationship and relocation compensation of Shanghai Fuchi Tech Co., Ltd. after the completion of the performance obligations agreed in the agreement, it is expected to affect the attributable net profit of about 32.2 million yuan in 2021 and subsequent years, which is uncertain about the impact on the net profit of specific accounting years, Finally, the data audited by the accountant shall prevail.
net profit has declined for two consecutive years
The reporter of Beijing business daily noted that the performance of Nbtm New Materials Group Co.Ltd(600114) has been under obvious pressure in recent years, and the attributable net profit has declined for two consecutive years, and there was a significant decline in 2020, with a decline of more than 70%.
According to the financial data, in 2018, Nbtm New Materials Group Co.Ltd(600114) realized an operating revenue of about RMB 1.918 billion, and the corresponding attributable net profit was about RMB 328 million; In 2019, Nbtm New Materials Group Co.Ltd(600114) achieved an operating revenue of about RMB 2.162 billion, and the corresponding attributable net profit decreased to RMB 308 million; In 2020, Nbtm New Materials Group Co.Ltd(600114) achieved an operating revenue of about RMB 3.283 billion, and the corresponding attributable net profit further decreased to about RMB 87.5 million, a year-on-year decrease of about 71.57%.
Recalling the Nbtm New Materials Group Co.Ltd(600114) 2020 annual report, at that time Nbtm New Materials Group Co.Ltd(600114) said that the decline in the company’s performance in 2020 was mainly due to the increase in costs caused by the acquisition of Shanghai Fuchi and the stagnation of the supply chain of some projects caused by the covid-19 epidemic and the Sino US trade war, and the operating results or total sales did not meet expectations. It can be seen that the acquisition of Shanghai Fuchi has dragged down the performance of Nbtm New Materials Group Co.Ltd(600114) in recent two years.
The Shanghai Stock Exchange is also concerned about this situation. In the inquiry letter, the Shanghai stock exchange requires Nbtm New Materials Group Co.Ltd(600114) to supplement and disclose the solutions and Countermeasures the company has taken and plans to take for the continuous decline of performance in combination with the current operation, finance and other aspects.
Xu Xiaoheng, an investment and financing expert, said that if the performance of the acquired company does not meet expectations, it will directly affect the profits of the listed company. Therefore, we should be vigilant against the large amount of goodwill formed by the acquisition of the listed company. Cheng Yu, a senior researcher at the understanding Research Institute, also said that high goodwill will increase the risk of asset impairment of listed companies. The provision of goodwill impairment will have a great impact on the company’s current performance. If there is a high amount of goodwill, the valuation of the company should be appropriately reduced.
Statistics show that Shanghai Fuchi’s main business is to use metal injection molding technology to produce small, three-dimensional complex high-performance structural parts and provide cost-effective metal injection molding parts. Its products are widely used in mobile Internet terminals, communication products, tool products, automobile products and medical devices. At that time Nbtm New Materials Group Co.Ltd(600114) said that the acquisition of Shanghai Fuchi was based on the needs of the company’s strategic layout, which was conducive to enhancing the sustainable operation ability of listed companies.
Nbtm New Materials Group Co.Ltd(600114) mainly uses metal (or non-metal) powder forming technology to engage in the R & D, production, sales and value-added services of new materials and their products. The company’s main business is divided into three parts: powder metallurgy pressed parts (PM), metal injection molding parts (MIM) and soft magnetic composites (SMC).
In response to the company’s related problems, the reporter of Beijing Business Daily called the Nbtm New Materials Group Co.Ltd(600114) Secretary Office for an interview. The staff of the other party said, “the specific situation can only be confirmed after the audit of the annual audit accountant. At present, we can’t answer any questions. The relevant situation has been clearly written in the announcement”.
(Beijing business daily)
