Chinese Rubber Company Sets Foot in Elderly-Care Services

Against the backdrop of a downward trend in the rubber tire industry, a Chinese rubber company has started to engage in a service that is unrelated to its core business, according to tireworld.com.cn.

Acquiring a Nursing Home

At the meeting of its board of directors held on March 18, Zhejiang Double Arrow Rubber Co., Ltd. reviewed and passed the move to purchase 22.5 percent of stake in Tongxiang Heji Nursing Home.

According to the move, Zhejiang Double Arrow Rubber Co., Ltd. will acquire the stake at 20.7 million yuan.

On March 17 Tongxiang Heji Nursing Home completed the registration changes in equityand legal representative with the industrial and commerce authority. It meanwhile obtained the new business license issued by the local market supervisor andadministrator. After these procedures, the nursing home will become a wholly owned subsidiary of the acquirer.

Earlier Zhejiang Double Arrow Rubber signed a cooperation agreement on investment with Shanghai HongRi Home Enterprise Management Limited. The two sides agreed to found a joint venture called the Shanghai Double Arrow HongRi Management Limited. (tentative name).

The new company will have a registered capital of 5 million yuan, of which 60 percent will be contributed by Zhejiang Double Arrow Rubber.

It is learned that Shanghai HongRi Home Enterprise Management Limited is mainly engaged in consultation, operation and management of elderly care services, withsophisticated management experiences in the field.

Seeking A New Engine for Profit Growth

Zhejiang Double Arrow Rubber Co., Ltd. is a major leader in China’s conveyor belt industry in terms of production sale, economic benefits and exports. It has an annual output capacity of over 24 million sq.m. of conveyor belts of various kinds.

Why will the backbone company in the conveyor belt sector set its foot in elderly-care service which is unrelated to the main business at all?

This may have something to do with the sharp declines in the rubber tire market.

According to its 2015 annual report, the company posted 953.4 million yuan of operating income, down 13.49 percent from 2014. Its total profits and net profits attributed to shareholders both fell by around 20 percent.

On the other hand, the company has seen the vast scope of the elderly-care services. As the Chinese population ages, the demand for elderly-care services has expanded, unfolding a bright future of development.

The company has accumulated some experiences in the elderly-care services through its initial participation in the management of Tongxiang Heji Nursing Home. However, as a late-comer in the business, it is still in the process of exploration.

In comparison, as an established company in the elderly-care services, Shanghai HongRi Home Enterprise Management Limited boasts strong management expertise and deep understanding of the sector. In particular, it has rich experience in learning about the nursing standards and providing training for nurses.

The cooperation is expected to accelerate Zhejiang Double Arrow Rubber’s investment into the elderly-care sector and bring out the synergy of the two as they complement each other in resources.