Q1 Net Profit Drops 15%, Foshan Lighting Changes Leadership Amid Performance Decline

In these difficult times, Zhong Xincai, who led Foshan Lighting (000541.SZ) for 20 years, has chosen to "step aside in favor of more capable talent."

Foshan Lighting released its Q1 report yesterday, revealing that in the first quarter of this year, the company's total operating revenue was 490 million yuan, a year-on-year decrease of 5.34%; net profit was approximately 56.93 million yuan, a year-on-year decline of 15.84%.

Two days ago (23rd), Foshan Lighting announced that Zhong Xincai applied to resign from his position as General Manager of the company for personal reasons, but remains the Chairman of the company. Foshan Lighting announced today that the company's Vice Chairman Liu Xingming will succeed Zhong Xincai as General Manager.

Zhong Xincai, who serves as both Chairman and General Manager, continued to deliver satisfactory results until last year. According to Foshan Lighting's 2011 annual report, the company's total operating revenue reached 2.26 billion yuan last year, a year-on-year increase of 15.59%; net profit was 290 million yuan, a year-on-year increase of 10.57%.

Foshan Lighting stated that in 2011, with the worsening European debt crisis, domestic real estate regulation, tight monetary policy, continuously rising CPI, and rising raw material and labor costs, the company improved its performance through strengthened management. Last year's bulb production reached 1.134 billion units, an increase of 2% over the previous year.

The domestic and international economic situation in 2012 is not optimistic, but Foshan Lighting still plans to achieve a development speed higher than the industry, gradually increase investment in LED and new energy fields, has established an independent LED sales division, and vigorously expand secondary and tertiary markets.

Zhong Xincai is currently 69 years old. He joined Foshan Lighting in 1964 and has served as the company's Chairman and General Manager since 1992. Foshan Lighting has always focused on its main business with stable performance, and has been known as the "cash cow" for years of high dividends.

An industry insider believes that Foshan Lighting is a "veteran enterprise" in the industry, with stable development in recent years, but its performance in emerging fields such as LED lighting is not eye-catching. "Zhong Xincai is probably old and wants to retire," a person who has followed Foshan Lighting for years told CBN Daily.

　　Zhong Xincai's position at Foshan Lighting also fluctuated several times. In 2005, he had once resigned as general manager. That year, Zhong Xincai, together with the company's senior executives, applied to conduct an MBO (Management Buyout) of Foshan Lighting, which was not accepted. The Foshan municipal government subsequently transferred the quality state-owned assets of Foshan Lighting to Osram, a wholly-owned subsidiary of Siemens, and Hong Kong Youchang through a public bidding process. Zhong Xincai's first resignation as general manager of Foshan Lighting came just as the new shareholders were about to take over.

　　In 2010, Zhong Xincai was elected as vice chairman and executive director, and was reappointed as general manager. In August of the same year, Zhuang Jianyi, the boss of Hong Kong Youchang, "got into trouble" and resigned as chairman of Foshan Lighting. In September, Zhong Xincai took over as chairman.

　　The "successor" Liu Xingming is currently 50 years old. He joined Foshan Lighting in 1983, served as deputy general manager from 1997 to 2005, as the company's general manager from 2005 to November 2008, and as the company's deputy general manager from December 2008. Liu Xingming, who is taking over the general manager's baton from Zhong Xincai for the second time, is expected to continue the company's established development approach.

　　Currently, Osram holds a 13.47% stake in Foshan Lighting, making it the largest shareholder; Hong Kong Youchang holds 10.5%, making it the second largest shareholder. Foshan Lighting states that the company has no actual controller.