Taipei, Dec. 14 (CNA) Taiwan-based bicycle brand Merida Industry Co. has said its cash flows remain normal amid reports rival Giant Manufacturing Co. sought to postpone payments to suppliers due to weakening global demand.

In an interview with CNA Tuesday, a Merida executive said low and mid-end bicycle models, demand for which has plummeted, only accounted for a small fraction of the company's product portfolio.

As a result, Merida has not sought to delay payments to its suppliers, the executive said.

Earlier this week, local media reported that Yen Ching-hsin (顏清鑫), head of Giant's global manufacturing center, had sent a letter to suppliers asking for a 45-day extension to make due payments.

According to reports, the letter was sent to suppliers due to ship their products to Giant between December 2022 and March 2023.

In a statement Tuesday, Giant said nondisclosure agreements prevented it from discussing the details of the letter sent to its suppliers.

Giant added that with the global bicycle industry returning to normal in the second half of 2022, demand for low-priced models had weakened.

This has raised inventory levels and caused supply chain chaos, according to Giant, which said it was determined to work closely with its suppliers to deal with these challenges and diversify market risks.

Dec. 13: Giant shares dive on reports it asked suppliers for payment postponement

Ideal Bike Corp. told CNA that compared with Giant, widely reputed to be one of the world's largest bicycle manufacturers, smaller contract manufacturers such as itself largely depended on ODM services.

Consequently, Ideal Bike Corp. said it did not face high inventory levels and would not need to delay payments to suppliers.

A source from another large-sized bicycle brand said COVID-19 restrictions had led to a spike in sales, and it was no surprise that Giant was now dealing with the problem of surplus inventory now that the pandemic has subsided.

Giant has said on several occasions its operations and working capital remained normal with sufficient cash flows, citing a move to complete the sale of convertible bonds in June and a rights issue in November that raised a total of NT$6.75 billion in funds.

Giant added it was upbeat about the global bicycle market in the long term as consumers worldwide have grown increasingly aware of the importance of environmental protection and staying healthy.

Mega International Investment Services Corp. analyst Alex Huang (黃國偉) said that to his knowledge, Giant's request to its suppliers came as the company faced account receivable delays from its clients, and such requests aimed to take precautions before it is too late to deal with future cash flow issues.

"Giant is a good company that is unlikely to default," Huang said.

In the first nine months of this year, Giant raked in NT$5.63 billion in net profit, up 16.5 percent from a year earlier, with earnings per share at NT$15.01.

Due to worries over Giant's financial health, its share price had moved sharply lower by about 11.02 percent from Monday to Tuesday, wiping NT$9.998 billion off its market capitalization.

However, the stock staged a rebound Wednesday, with Giant shares rising 4.13 percent to close at N$214.50 on the Taiwan Stock Exchange.

(By Pan Chih-yi and Frances Huang)