Giant Manufacturing Co., one of the leading bicycle brands in the world, saw its share prices tumble on Tuesday after a sell-off sparked by reports that the company had asked its suppliers for payment postponements amid weakening global demand, dealers said.
Giant shares plunged 8.04 percent to NT$206.00 (US$6.71), off a low of NT$202.00 with 5.99 million shares changing hands on the Taiwan Stock Exchange (TWSE), where the Taiex, the benchmark weighted index, had lost 0.61 percent, falling to 14,522.96 points.
Giant’s stock faced headwinds soon after the local equity market opened as investors took cues from the bicycle giant’s financial woes. The share continued to trade down into the end of the trading session and the sell-off even spread to its rival Merida Industry Co., whose shares also moved sharply lower by 6.35 percent to end at NT$177.00 during the session.
On Monday, local news media reported that Giant had asked its suppliers to allow it to postpone payments for 45 days, citing a letter signed by Yen Ching-hsin (???), head of Giant’s global manufacturing center, and sent to the company’s suppliers. The reports said that the requests will affect the suppliers which had or will ship their products to Giant during the period from December 2022 to March 2023.
The requests to suppliers raised concerns over Giant’s financial conditions at a time when the global bicycle market has felt the pinch from weaker demand, leading to growing inventory adjustments, dealers said.
In response, Giant issued a statement later Monday, saying the letter signed by Yen served as a communication channel between the company and its suppliers, and due to the non-disclosure agreements with its suppliers, it could not reveal any details about the content.
Giant, however, expressed regret about market speculation caused by the letter being leaked to outsiders.
The bike brand said the global bicycle industry has gradually seen operations returning to normal in the second half of this year due to fading effects from the COVID-19 pandemic. However, demand for low-priced models continued to fall, raising inventory levels and causing chaos in the supply chain, it said.
As a leader in the global bicycle industry, the company is determined to work closely with its suppliers to deal with inventory adjustments and diversify market risks, Giant said.
The bicycle brand added it will team up with its partners to improve the situation and allow the supply chain to return to normal, emphasizing that this was Giant’s indispensable responsibility.
Giant said the company has been grateful to all of its suppliers, including a large-sized Japanese company, for providing flexibility to the Taiwanese bicycle brand in adjusting orders and payments.
But it admitted that due to a weakening global market, inventory levels are unlikely to return to normal until the first half of next year.
According to local news media, Japan’s Shimano serves as a prominent component firm of Giant. Meanwhile, Taiwan’s Cheng Shin Rubber Ind. Co., which owns the brand of Maxxis tires, as well as Kenda Rubber Industrial Co., bike chain maker Kuei Meng International Inc. and aluminum billet producer Taiwan Hodaka Technology Co. are among Giant’s major suppliers in Taiwan.
Giant said the company has completed a rights issue and has issued convertible corporate bonds since Nov. 24 to raise a total of NT$6.75 billion in funds as working capital, adding that its operations remained normal.
Giant added that it was upbeat about the global bicycle market in the long term as consumers worldwide have grown increasingly aware of the importance of environmental protection and staying healthy.
In the first nine months of this year, Giant raked in NT$5.63 billion in net profit, up 16.5 percent from a year earlier, with earnings per share at NT$15.01.
Source: Focus Taiwan News Channel