(Yicai) Nov. 23 -- Shares of Loncin Motor rose despite the Chinese supplier of motorcycles and engines said it sold its Italian unit at a loss of CNY242 million (USD33.9 million) because of the failure of the latter’s aircraft engine project and its poor performance.

Loncin [SHA: 603766] was trading up 1.3 percent at CNY5.67 (79 US cents) as of 1.55 p.m. in Shanghai today. The stock fell as much as 2.7 percent in morning trading.

Loncin sold its whole stake in Costruzioni Motori Diesel to a minority shareholder for EUR1 million (USD1.1 million) and paid EUR13.9 million (USD15.2 million) to end all of its cooperation agreements with the unit, the Chongqing-based seller announced yesterday.

The deal will cost Loncin CNY242 million, equal to nearly 50 percent of its annual net profit last year, the firm noted.

Loncin announced in November 2016 that it would acquire 67 percent of Costruzioni Motori Diesel for EUR41.1 million to enter the general aviation piston engine market. But at the time, Costruzioni Motori Diesel was a supplier of automobile and agricultural machinery engines, and its general aircraft engine products were still under research and development, yet to be commercialized.

After completing the acquisition, Loncin inked a deal with Costruzioni Motori Diesel in 2018 to produce the aircraft engine technology under development by Costruzioni Motori Diesel in China. But the plan was never completed.

Loncin attributed the failure of the aircraft engine project to changes in the global macroeconomic and geopolitical factors, which had a significant impact on the overall operation and future development of Costruzioni Motori Diesel, which had received notices from its major auto part customers last month about the termination of their long-term business partnership.

For the above reasons, Loncin decided that it was the right time to sell the assets in order to reduce the possibilities of uncertainties related to Costruzioni Motori Diesel, the company said. 

Editor: Futura Costaglione