January 22 (SeeNews) - South Africa's Automotive Leather Company (ALC) Group has ceased car seat cover production in Bulgaria and plans to liquidate its subsidiary in the country, ALC's Canada-based parent Exco Technologies said.
ALC Bulgaria has voluntarily filed a liquidation petition prompted by ongoing operating losses and will appoint a trustee within the next 14 days to liquidate the company, Exco Technologies said in a statement on Monday.
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The liquidation is driven by the failure of ALC Bulgaria to reach an agreement with its primary customer for continued price support. Given the increase in local operating costs and change in labour conditions over the last several years, ALC’s operations had become unviable without improved pricing, Exco Technologies said.
"The liquidity filing of ALC is disappointing, however it was the only alternative given the company’s weak liquidity and poor financial prospects," said Brian Robbins, Exco’s President and CEO. "On the positive side, the elimination of ALC’s loss-making operations will immediately improve our go forward results and free up management time for more productive activities."
The impact of ALC’s insolvency filing on Exco’s results will be absorbed in its first quarter of fiscal 2019, ended December 31, 2018. This impact is expected to include a non-cash charge of approximately $6.1 million (5.4 million euro) related to the write-off of ALC’s remaining equity and operating losses during the quarter of approximately $2.2 million.
The deconsolidation of ALC will eliminate approximately $23.1 million of total assets and $23.1 million of total liabilities from Exco’s balance sheet, including $4.2 million in net debt. ALC generated revenues of approximately $20 million in the first quarter of fiscal 2019 with 1,439 employees.
The company launched its first factory in Bulgaria in 2012 and currently operates three production facilities in the country.
($ = 0.880285 euro)