IMI books P4.7-B loss from sale of British subsidiary

MANILA  -The Ayala Group’s Integrated Micro-Electronics (IMI) booked a P4.7-billion ($84 million) loss from the sale of British subsidiary STI Enterprises Ltd. six years after it was acquired, underscoring persistent supply chain woes plaguing the sector.

The electronics manufacturing arm of conglomerate Ayala Corp. said on Friday it agreed to sell 80 percent of STI, alongside minority stockholders owning the remaining 20 percent, to Rcapital, a private investment firm based in London.

IMI said the $84 million writedown includes a non-cash goodwill charge of $55 million, cutting the company’s equity by 22 percent. IMI said this will affect its debt to equity ratio, however, the ratio will remain “within the company’s target range”.

IMI said in the disclosure the parties agreed to sell STI for £7.5 million ($9.5 million). This was below their acquisition cost, which was once valued as much as $54.7 million, a previous disclosure made by IMI showed.

“Geopolitical and industrywide issues including Brexit, COVID-19 and the component shortage significantly hindered the company’s progress the past few years and we believe that the buyers, Rcapital, are well-equipped to support STI’s turnaround by providing additional funding and synergy opportunities within its portfolio of companies,” IMI president Jerome Tan said in a statement on Friday.

IMI acquired STI in a bid to diversify its business to the aerospace, security and defense sectors. STI has factories in the United Kingdom and Cebu, Philippines.

“This divestment will enable IMI to focus resource allocation and management efforts to drive our core businesses in the mobility, industrial, and smart energy markets,” Tan said.

The writedown caused IMI to record an $82.9 million loss in the second quarter of 2023, a separate filing showed on Friday. Gross margin during the quarter expanded to 9.6 percent from 8.1 percent while revenues slipped 3 percent to $345 million.

IMI said demand for certain products was also lower as customers delayed new orders and used up existing inventory. It said VIA Optronics and STI booked $62.8 million in revenues during the quarter and a loss of $1.9 million.

“[W]e continue to push for increased manufacturing efficiency and revenue growth with the right customers. We recently inaugurated the Laguna manufacturing facilities for one of our new partners, Zero Motorcycles, a world-leading EV motorcycle company. We look forward to forging more new partnerships and continue to grow a more profitable IMI,” company CEO Arthur Tan said in the statement.