Private equity-backed Chinese sportswear company Li Ning has warned it faces a substantial decline in profits this year.
The company, which is backed by US buyout giant TPG Capital and Singapore sovereign wealth fund GIC, blamed weaker sales and increased marketing costs for its share price hitting a six-and-a-half year low, Reuters reported.
It said trade fair results showed total order value would fall by the high teens year-on-year, including a 20 per cent-plus fall for clothing.
Brand marketing costs and promotion expenses for the company are also set to increase after it signed a five-year agreement to be the equipment sponsor for the Chinese Basketball Association for the next five years.
A statement from the firm said, “Competition within the sporting goods industry has intensified, discount promoting efforts have further increased and the pressure of inventory clearance at the retail level remains strong.”
TPG agreed to subscribe for $89m of convertible bonds, which will bear an annual interest rate of four per cent, while GIC agreed to subscribe for $30m.
The buyout firm also agreed to buy 53 million ordinary shares from Li Ning, the company’s founder.
Li Ning remains the single largest shareholder of the company with an equity stake of 23 per cent.
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