Taiwanese snack food giant Want Want Holdings found itself having to justify its diversification strategy earlier today [Thursday] as the market responded badly to news of the group’s plans to jointly build a hospital in China’s Changsha city.
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After the joint venture, with a local partner, was announced on Wednesday, Want Want shares made their largest one-day fall for four years as investors sold the stock fearing that the initial capital expenditure of TWD$28m (US$0.8m) and the promise of a further TWD$28m will dampen the firm’s earnings.
Company VP Adams Lin told Reuters: “We forecast the hospital will break even in two years and be profitable in five years after it opens in 2005.
“If the hospital was not going to make money, we would not have done it.”
Lin stressed however that Want Want is still committed to its core business of snack foods.
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By GlobalDataThe hospital should be completed by the end of 2004. Want Want non-executive director Dr Cheng Chun Tar, the brother-in-law of chairman Tsa Eng Meng, will head the venture, in which Want Want will hold 70%.
