Ford is to take a controlling interest in its Russian vehicle making joint venture with Sollers through the acquisition of preferred shares though the 50/50 split of the ordinary shareholder structure will remain unchanged, Sollers said on Friday.
“Given the volatile and changing market, Ford Motor Company and Sollers agreed certain changes to the JV structure and the shareholders agreement that will allow both parties to continue to support Ford Sollers in the near term,” Sollers said.
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“Under agreements reached between the parties on 31 March, FMC will provide additional funding to the Ford Sollers joint venture.
“The funding will be utilised to serve the strategic targets, such as new product launches and further investments in the localisation of component manufacturing, which in aggregate will improve the operating efficiency of the joint venture and improve the market position.”
The statement added the agreements provide for certain future rights for the partners to redeem Sollers’ 50% interest in the joint venture at a minimum predetermined value payable at the date of redemption.
“We embrace the intentions of Ford to deliver financial support, essential to provide a platform for future growth of the joint venture. Ford and Sollers are working jointly as partners, to improve the business outlook for the [joint venture] on the Russian market, which is believed to be amongst the largest in Europe,” said Nikolay Sobolev, first deputy CEO and CFO of Sollers OJSC.
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By GlobalDataSollers said group revenue for the year to 31 December, 2014 fell to RUB47.9bn from RUB 61.3bn in 2013.
EBITDA was down to RUB4.3bn from RUB6.4bn the previous year. EBITDA margin was flat at 9%.
Sollers blamed the revenue decline on “the decrease in sales caused by the overall deterioration of the car market”.
“The profitability of SsangYong business was negatively influenced by the considerable decline in SsangYong sales and substantial depreciation of national currency. Nevertheless, UAZ business improved the profitability as well as increased its share on SUV and LCV markets,” Sollers said.
Operating profit was RUB3.6bn and the net loss of RUB3.7bn was due to losses at the Ford Sollers JV of RUB5.5bn last year.
Stripping out the Ford JV loss, group net profit, including profit from the consolidated business and profits from other joint ventures, was RUB1.7bn.
According to Reuters, citing the Association of European Businesses, Russia’s car sales decline has continued this year with March sales down 42.5% and the market overall expected to fall by around 24% in 2015.
Sollers also has joint ventures with Mazda, Toyota and Isuzu plus a partnership with Mahindra’s SsangYong.
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