In a significant turn of events, Qu Mei Home Group Co., Ltd., recognized by the stock code 603818.SH, convened a board meeting to deliberate upon a crucial decision, influencing the future trajectory of the companyIt has been announced that the originally scheduled “Phase II Project of Henan Qu Mei Home” and the “Capacity Upgrade Construction Project of Ekornes Norway Factory” projects will undergo a postponementThis strategic alteration reflects both the current market conditions and a broader trend impacting the industry.

The decision to delay these projects was attributed to fluctuations in the industry cycle, which have hindered the commencement of the company's planned fundraising initiativesTaking into account the existing scenario, Qu Mei Home adopted a cautious approach to its capital investment strategyAs a result, the anticipated operational dates for these projects have been shifted from December 2025 and September 2025 to December 2027 and December 31, 2026, respectively.

As pressures mount, Qu Mei Home has found itself facing financial headwinds in recent timesAccording to reports from the first half of 2024, the company's debt-to-asset ratio stood at a concerning 66.06%, surpassing the median and average ratios of its domestic competitorsBy the third quarter of 2024, this ratio remained alarmingly high at 65.55%, indicating a persistent struggle with leverage; the total current liabilities had soared to 1.942 billion yuan, juxtaposed against cash reserves of just 896 million yuan.

In its performance forecast for 2024, Qu Mei Home acknowledged the existence of substantial interest-bearing liabilities overseasFollowing a downturn in profitability, the company, which transitioned from profit to loss in 2023, anticipates continued losses for the fiscal year 2024. The financial forecast paints a daunting picture, with analysts raising red flags about the company's sustainability under such burdens.

The postponement of these fundraising projects has already exceeded one year

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Back in January 2024, Qu Mei Home announced its intention to issue stocks to specific investors, indicating a shift towards a formal fundraising strategyThe initiative aimed to secure approximately 545 million yuan through the issuance of around 117 million domestic A-shares priced at 4.66 yuan each.

The funds were intended to bolster two major projects, namely the "Phase II Project of Henan Qu Mei Home" and the "Capacity Upgrade Construction Project of Ekornes Norway Factory," alongside addressing some debt obligations and enhancing working capitalResearchers at financial analytics platforms have underscored the significance of the Henan project, which, through an investment of 350 million yuan, was designed to enhance the company's soft furniture offerings—such as mattresses, soft beds, and sofas—consolidating its position within a one-stop service modelIn parallel, a budget of over 22.8 million yuan was set aside for upgrading production lines for the Stressless brand at the Ekornes factory.

Despite being projected as pivotal to the company's growth, both endeavors have faced stagnation, with no fundraising efforts initiated as of February 10, 2025. Soon after, the company publicly outlined the reasons for this delay, pointing to various challenges it has grappled with in the marketplace: on the domestic front, furniture demand has been negatively impacted by a downturn in the real estate sector and intensified competition, prompting the company to pivot towards profitability and risk mitigation in its domestic operations.

Internationally, the macroeconomic fluctuations have also disrupted consumer demand across Europe and North AmericaEven with global market conditions showing some signs of improvement in 2024, the pace of recovery has not matched expectations, leading to operational capacities adequately covering current sales demandsTo ensure the effective and secure utilization of its raised funds, Qu Mei Home concluded that it was prudent to postpone these key projects.

The persistent struggle with financial losses highlights a pressing issue: the company's short-term debt pressure is becoming increasingly evident

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By the end of the third quarter of 2024, current liabilities reached a staggering 1.942 billion yuan, including 330 million yuan in short-term loans, 266 million yuan in accounts payable, and 171 million yuan in employee compensation payableIn stark contrast, the company's cash reserves were insufficient to cover all current liabilities, standing at only 896 million yuan.

In the financial forecast for 2024, Qu Mei Home also acknowledged the ramifications of its debt levels on financial stabilityHigh interest rates in North America and Europe have exacerbated the situation, alongside a heavy burden of overseas interest-bearing debtAs indicated, these factors have dramatically increased the company's financial expenses, negatively impacting net profit during this period.

Interestingly, family members of Qu Mei Home’s leadership have sought alternative methods to alleviate the pressures the firm facesRecently, Zhao Ze Long, the son of the company’s chairman Zhao Rui Hai, utilized social media platform Douyin to post a series of humorous videos, cleverly branded with tags like "Debts of the Father Paid by the Son" and "Negative Second Generation," which reflect on familial financial strainsThis tactic has sparked market discussions and drawn some attention toward Qu Mei Home at a crucial time.

As a manufacturer of mid- to high-end residential furniture and associated home products, Qu Mei Home has navigated through a tumultuous financial landscape in recent yearsThe company's overseas interest-bearing debt has seen its interest cost escalate due to decisions made by the Federal Reserve to raise rates, putting further strain on profitability.

In response to these financial challenges, in the first quarter of 2023, Qu Mei Home undertook part of its overseas debt repayment and restructuringThe company also sought to bolster its capital by refinancing, which aimed at reducing debt riskAdditionally, the firm has engaged in reevaluating its properties within Beijing, opting to lease out vacant factories and office spaces, striving to diversify income avenues to mitigate financial pressures.

Despite these concerted efforts, the downward trend in the company's performance remains alarming

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