Leoni has signed a joint venture (JV) deal with China’s Beijing Hainachuan Automotive Parts (BHAP), a subsidiary of state-owned Beijing Automotive Industry Corporation (BAIC). The Chinese State-owned Assets Supervision and Administration Commission (SASAC) approved the JV.
Leoni will sell 50% of the shares in its wiring systems plant in Langfang to BHAP. This plant has to date made cable harnesses exclusively for cars made by Beijing Benz Automotive (BBAC), the joint venture between Daimler and Chinese partner BAIC.
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The new JV will give Leoni the opportunity to gain new orders from BBAC and other carmakers. The JV will be a key element for Leoni with respect to expanding its business in Asia in line with its strategy of profitable growth. All of Leoni’s other activities in China are unaffected; they will continue to exist outside the new JV and will likewise be developed further.
Based on the IFRS accounting principles, the JV will be accounted for by the equity method in the consolidated financial statements of Leoni. There will be no notable effects on sales or operating profit during the current financial year. It will, on the other hand, mean consolidated sales of approximately EUR4.8bn (US$5.42bn) in fiscal 2016 rather than the EUR5bn forecast previously. The target for a 7% EBIT margin remains unchanged. Long-term, the JV will contribute to further improvement of the Leoni Group’s position in China.
