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Furi Electronics Industrial development of state-owned listed companies needs driving force from cap

2016/1/8 15:59:17 Times

                                                                                                ——Reprinted from



BianZhihang, Chairman ofFuri Electronics accepting interview by Fuzhou, January 7 (Xie Xi, Wu Longzhong) In 2015, Chinese economy is entering into weakness. Economic downturn, adjustment of industrial structure and resource structure is restructuring the new economic ecology. In the wave of reform, Fujian electronics state-owned enterprises Fujian Furi Electronics Limited Company by Share has always been adhering to the exploration spirit of “daring to eat crab”, utilize the capital market to realize the explosive growth and is gradually walking out of the “switch period”.

During the beginning of reform and opening up, Fujianstate-owned enterprise Fujian Electronics equipment factory is at the forefront of reform of state-owned enterprise with the spirit of “daring to eat crab”. The joint venture Fujian Hitachi Television Co., Ltd. (abbreviated as FuriCompany) is established with Japanese Hitachi Company. The new company produces “Furi” brand television and becomes the first Sino-foreign joint venture in electronics industry through the whole country. With the continuous development of the enterprise, in 1988, Furi Company as the core, a combo composed of five “Furi color television” supporting enterprises – Fujian Furi Group Company is established. In order to conform to the development trend of the market economy, in 1999, Fujian Furi Group Company initiate and establish independently Fujian Furi Electronics Co., Ltd. by Share (abbreviated as Furi Electronics), and is listed on the Shanghai Stock Exchange. (Stock Code: 600203)  

For more than ten years listed in the market, Furi electronics rotates through “Two Wheels”- Capital and Industry, undergoes mergers, acquisitions and assets optimization, and the company has been transformed from the traditional television production enterprises, and establishes three main business industry, such as LED photoelectric and green environmental protection, communication and smart appliances, domestic and foreign trade supply chain.

Nowadays, under the leadership of Furi electronics leaders of several generations, the company realizes the maximization of asset securitization and capital value by utilizing the capital operation. It prospers in the capital market and obtains rising popularity.The company's operating income increases from 984 million RMB in 2009 to 3 billion and 511 million RMB in 2014, while in the first three quarters of 2015, the company's operating income has already reached to 4 billion 449 million RMB.

Substantial growth in revenue has benefited from capital operations. If it relies solely on existing enterprises to expand investment, production and market development will take time. In the recent years, during the big wave of mergers and acquisition of state-owned enterprises, Furi electronics maintains a keen sense, makes full use of the listed company platform, through capital operation to raise funds, conducts mergers and acquisitions of related enterprises. It achieves a leapfrog development by integrating and making effective use of the existing resources.

“The company's future development will be based on the existing leading industries, seize the opportunities for development of the industry, through further expansion of investment, strengthen through mergers and acquisitions, and strive to become mainstream enterprises within the industry.” BianZhihang, company chairman said.

Looking for the main business and long wandering, business facing up with survival challenges

Furi electronics has relied on the television industry to gain the glory. However, the development of Furi electronics is not smooth and also facing up with the “labor pains” from the transformation and upgrade of traditional industry.The company's original TV and other services are becoming increasingly difficult because of the lack of profitability. As a listed company of state-owned enterprise, we are facing the problems like what are the challenges faced by the industrial transformation and upgrade? How has the company been successfully transformed?After the company is listed on the market, what is the present situation of merger and acquisition?

In fact, since Furi electronics is listed on the market, it has experienced a long wandering process of looking for main business. It has experienced the operation track of taking the television as the main business, fading out of television industry, looking for main business and establishing three main businesses.During this period, Furi electronics invested notebook, laser treatment instrument, but after several twists and turns, all ended in investment failure.Although the foreign trade grows rapidly, the profit is low.

However, severe situation is not limited to that. Financial crisis in 2008 and 2009 deteriorate the company operation environment year by year. The business suffers from a sharp decline and the main business revenue is decreasing rapidly and loses profit. The decreasing bank credit rating makes the bank recover the loans and there is a tight cash flow for the company.  In addition, the company is shouldered with a heavy historical burden, and the survival of the enterprise is seriously challenged.

Successfully throw off the history burden, transformation and upgrade is determined

Seek survival in adversity, and seek development in change. Through many efforts, Furi electronics has experienced three years of precipitation until 2012. It continuously gathers strength in technology and capital and successfully throws off the history burden and gradually establishes the main business. We can say that it is imperative to implement industry restructuring and transformation and upgrade.

Industry adjustment shall be based on existing industry.Furi electronics does not blindly follow the market boom, based on the existing industry, seize the historic opportunity for industrial docking between Fujian and Taiwan, look for strategic emerging industry projects that are in line with national policy support and suitable for the current situation of the company.After many rigorous market visits and repeated negotiations,the company focuses on LED photoelectric, new energy, energy-saving and emission reduction, electronic information and other projects to carry out collection, analysis and research,conducts key tracking, and establishes the initial transformation direction through deep and full investigation.

After nearly three years of unremitting efforts, through resource integration, asset restructuring, mergers and acquisitions and a series of ways, Furi electronics completes the industry structure adjustment and layout optimization, and successfully realizes the company’s strategic transformation, and gradually establishes three main business, includingLED photoelectric and green environmental protection, communication and smart appliances, domestic and foreign trade supply chain. After the company has been successfully transformed, the business gains rapid increase. From 2013 to 2015, the company’s operation revenue shows a substantial upward trend and the profitability have been improved a lot.

Activate the capital market, explosive growth after merger and acquisition

Indeed, although enterprises have found the main industry, in a word from Buffett, if an enterprise wants to achieve rapid development, it requires mergers and acquisitions. While Furi electronics holds the courage of breaking the caldrons and sinking the boats, moves forward in the rapid steam, makes full use of the capital market, and realizes the leap forward development.

As an early state-owned enterprise listed on the market in Fujian province, in the recent two years, through activating the capital market, Furi electronics realizes the capital “blowout” substantial increase. In March, 2014, the company successfully completed the first round issuance of non-public shares in the past more than 10 years, and raised fund of 278 million RMB. The company realizes the capital market refinancing and this has become a milestone in the company’s development; At the end of April the same year, the company started the second round capital operation, and implemented important assets restructuring. In December, through issuance of non-public shares, the company completed 100% equity acquisition of CHINO communications at the price of 800 million RMB and realize twice capital market refinancing in the same year; In February 2015, the company lunched the third round of private placement and successfully gained approval from the China Securities Regulatory Commission on December 28. This round of private placement will raise funds of 650 million RMB torepay bank loans and replenish working capital. The successful activation of capital market provides powerful support for the development of company’s main business.

In addition to the company's capital increase, the characteristics of Furi Electronics industrail integration in the implementation of mergers and acquisitions are becoming more and more obvious.

From 2012 to 2014, the company completes the capital and business restructuring of Fory  and FuriPhotoelectricity, and bring in the business team, increase investment, carry out new product research and development, expand production scale and improve marketing channels; Through equity transfer and capital increase and other ways, 195 million RMB is invested to purchase 92.8% equity of  Shenzhen Mary Photoelectricity and expand LED display screen business scale; 20 million RMB is invested to purchase 20% equity of Fujian Costal E-lighting Technology Co., Ltd.;  119.85 RMB is invested to purchase 51% equity of Shenzhen Runlite Technology Co., Ltd. and fill the LED lighting packaging business gaps; Through the integration, mergers and acquisitions and construction, the company's LED business covers the LED packaging, application products and engineering operations. LED industry continues to grow, and the status of the LED industry has improved substantially.”At present, the competition in every stage of LED industry is very fierce, and the overall profit margin is declining. But through vertical integration, the advantage of opening up the industrial chain is that it can reduce production costs and improve overall profitability.”BianZhihang, chairman of the company said.

Besides, Furi electronics has completed the equity acquisition job of Fujian Lantu Energy Saving Investment Co., Ltd. and Fujian Environment Friendly Technology Co., Ltd. The company officially entered the industrial energy and building energy conservation areas, and initially formed a green environment industrial system.

In addition to the LED photoelectric and green environmental protection industry, in communications and smart appliances industry, Furi Electronics actively promotes industrial upgrade, and acquires the well-known enterprise in communications industry, Shenzhen CHINO Communication Co., Ltd. in December, 2014, so that the company quickly cuts into the domestic and international well-known mobile communications terminal manufacturers and operators to provide mobile OEM and ODM contract manufacturing services, and enhance the overall competitiveness. 

Effective prevent operational risks, equity incentives to retain talent

Use the capital market to improve the industrial chain through mergers and acquisitions, what is the reason for Furi Electronics to do so?“The establishment of a new enterprise input and output is long. Besides the capital investment, but also it needs excellent management team to support in production management, technology development and marketing and other aspects, and the ability of a team need time to verify.” While through external mergers and acquisitions, the performance of the acquired enterprises can prove the ability of the existing management team, and also can quickly form the main industry, and achieve leapfrog development. These acquired enterprises have high operation efficiency but lack development fund. As a company listed on the market, Furi electronics has standard management and capital operation advantage. Through mergers and acquisitions, both resources can be effectively integrated, to achieve complementary advantages, so as to enhance the overall competitiveness and achieve win-win situation.” BianZhihang, chairman of the company said.

Of course, successful acquisition of enterprises is only the first step for the rapid growth of enterprises. For the following steps, the risk management of these enterprises can not be ignored.  In terms of risk prevention, Furi electronics takes many effective measures.

On one hand, establish investment risk prevention and control mechanism. The company carries out early warning and prevention of the investment process from the aspects of project selection, due diligence, demonstration, decision-making, approval, implementation, afterwards reporting, and follow-up management. Meanwhile, in the acquisition of new enterprises, the company requires the original shareholders of the acquired company to conduct performance commitments, and unrealized commitments must be compensated by cash or equity.

On the other hand, establish financial risk prevention and control mechanism. Firstly, strengthen the risk prevention of loan and guarantee for subsidiaries. Secondly, complete the company's financial information management, timely grasp the subsidiary's financial situation, and strengthen financial dynamic monitoring. Thirdly, increase internal and external audit efforts. According to the audit situation, the company organizes internal self-examination and rectification, and strengthens the operation and financial risk prevention and control of subsidiaries.

Another aspect is to promote the integration of enterprise culture. There are objective differences in management and culture between M & A enterprises and their former companies. In order to make the concept “you and me” to “us” in place quickly, Furi electronics organizes and  plans to promote the integration of new and old enterprise culture step by step. One is to require the acquired enterprise to standardize operation according to state-owned listed enterprises specification and enhance enterprise cohesion; the other one is to require the original enterprise of Furi electronics to learn from acquired enterprises to focus on the market, react rapidly and operates effectively. Through mutual learning and communication, both can learn from each other, build consensus, trust each other, strengthen integration and fusion in management, teamwork and culture, and form common values and business philosophy, establish Furi Electronics new enterprise culture with strong vitality, enhance the core competitiveness of enterprises, realize the healthy and sustainable development of enterprises.

Well, there is another problem. These acquired enterprises do not have their own employee. How to retain the talents for the company?  “For retaining talents, the company mainly starts from three aspects, such as, the stock equity system reform, the distribution system reform and the personnel system reform”, chairman BianZhihang said.

Stock equity system reform: In compliance with the relevant provisions of the Commission, the company will gradually implement the equity incentive plan, the incentive target will cover the company's directors, executives and core staff. Meanwhile, the company supports qualified enterprises to carry out mixed ownership reform, and implement the backbone of employee stock ownership, so that their interest is in solidarity with the company, more effectively stimulate the work potential, gather talents, and then achieve the sustainable development of enterprises. 

Distribution system reform: Through the reform of the distribution system, the company has initially realized the salary system which can increase or decrease, implement annual salary system reform for all members, insist that the enterprise responsible person remuneration is closely linked to the business performance, and form a distribution mechanism combining incentive and restriction. And through the continuous exploration different salary system in different industries, different enterprises, and different places, the company uses technology, management and new ways  for business resources to participate in the distribution, and strives to further improve the distribution system.

Personnel system reform: Establish and improve the evaluation system of talents, and define the categories and levels of talents. To further optimize the personnel structure, implement external and internal competition, gradually implement market-oriented recruitment for executive, middle-level and subordinate enterprise leaders, encourage internal talent actively participate in competition, and then effectively change the situation that the spire is not sharp and the foundation is not wide. Constantly improve the personnel incentive measures, motivate and retain good and effective personnel, and provide strong personnel protection for the company's development.

The "labor pain" of transformation and upgrade tempers quality and spirit of Furi people when meeting difficulties; The successful experience of capital operation strengthens the development confidence and determination for Furi people to strive for innovation. Furi electronics certainly will play a more dazzling and more beautiful development melody, and usher a new round innovation development of “coming out of the cocoon and becoming a butterfly”.


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