YANTAI, China—Shandong Linglong Tyre Co. Ltd. is set to launch its IPO on the Shanghai Stock Exchange, the company has announced.
Linglong plans to issue up to 200 million shares or up to 16.7 percent of its total shares after issuance with par value of 15 cents per share.
Funding raised through the IPO is earmarked for a $271.4 million high performance passenger radial tire upgrade project with 10 million unit annual capacity as well as cash flow supplements.
The tire maker currently has the capacity to manufacture 41 million units per year.
“The country's auto industry is still at its golden stage and the steady growth of auto production, especially regarding the competitiveness of domestic vehicle makers, will largely boost domestic tire makers' share in the OE market,” said the company's prospectus.
China had a 125 car parc per thousand populations at 2015 year-end, well below world average. The country's vehicle production and sales volume grew by 3.3 percent and 4.7 percent, respectively, last year against nationwide economic slowdown.
Besides the upgrade of older facilities, the project, located in Linglong's existing site in Yantai, Shandong, also contains the divesting of 3 million unit annual capacity for bias tires and new facilities for the company's own developed ultra low profile, wet-skid resistant and low noise tires with 8 million unit annual capacity.
Construction is scheduled to be completed in two years and full operation is expected in another two. Annual sales of the project, when in full operation, is pegged at $724.8 million with $85.9 million profit.
Last year Linglong had a 19 percent drop in net profit to $102.9 million on a 15 percent decrease in revenue to $1.36 billion, due to “factors such as global economy and commodity prices” and a fire at its Thailand plant that caused damage to produced tires, said the prospectus.
With the Thailand plant started up in 2013, Linglong's sales to the US picked up by 10 percent in 2015 to $171.9 million, compared to a downslide for most of its Chinese competitors on account of the anti-dumping tariffs. Overseas sales took up 55 percent of the company's total sales last year, stable over the past three years.
Linglong projects similar revenue and net profit in 2016 compared with 2015, and expects to have a total of 80 million unit annual capacity by the end of 2020.