Elec-Tech International (ETI) financial performance and management condition has come under the spotlight, as the company’s conflict between NVC Lighting intensifies.

The company reported total revenue reached RMB 1.94 billion (US $320 million) in first half of 2014. Although, revenues soared 42.98 percent YoY, net profits plunged 35.03 percent to RMB 32.81 million. Net loss excluding non-recurring losses was RMB 17.96 million, indicating net profits flopped 546.91 percent YoY.

Worth noting is government subsidies in the 1H14 report reached RMB 64.43 million, indicating without government subsidies the company’s losses would have been far worse. Times-Weekly estimated without government support, ETI’s actual losses would have been RMB 25.73 million.

China’s local governments have been promoting the LED industry since 2009, which has resulted in a series of subsidies that attracted investors from different sectors. Under these circumstances, ETI ended business operations as a home appliance manufacturers, and transited into the LED industry. According to Time-Weekly statistics, ETI’s financial data from the last six years show from 2009 to 2014, government subsidies the company has received totaled RMB 1.11 billion, while actual net profits have been a mere RMB 856.52 million. Starting from first half of 2009, subsidiaries ETI received were RMB 8.10 million, RMB 269.56 million, RMB 310.26 million, RMB 224.22 million, RMB 232 million and RMB 64.43 million respectively. Subsidies exceeded the company’s actual revenue by nearly RMB 250 million. From this it can be seen, ETI used subsidies to conceal actual financial situation, and even turn around losses.

Former NVC Lighting CEO Wu Changjiang has attacked former ETI CEO Wang Donglei on this issue, and noted the company has been over reliant on government subsidies. In August 2014, Wu even revealed ETI’s financial situation was a mess and “might even declare insolvency.”

In response, ETI Secretary of the Board Fei Deng said the LED industry is still an emerging industry that is largely supported by government subsidies. The subsidies values are slightly higher, but is the norm for this industry. This is a necessary phase for the LED industry. Especially for ETI which is just in its early stages in the LED industry.

Once NVC Lighting restores orderly management, it is still possible for Wang to return as ETI’s CEO.

The initially cordial merger between ETI and NVC Lighting gradually turned sour in the last 19 months. Wu was willing to sell his stake in the company so former ETI CEO Wang could become an NVC Lighting investor. The alliance between the two gamblers indicated the merger was a gamble to begin with. Originally, Wang hoped ETI and NVC Lighting could follow the integration plan, but with the ongoing “NVC Lighting drama” it will take the company a very long time before it can find a new solution to its export situation.