KUALA LUMPUR (April 28): China Automobile Parts Holdings Ltd (CAP), which missed its 2016 Annual Report (AR) submission deadline today, said its external auditors need more time to verify the company's sales details via various regional agents and foreign trade customers.

It said in a Bursa Malaysia filing that the auditors also need to identify product quality issues and to verify the loss caused by regional agents and the compensations made, as well as the trademarks infringement litigation involving the company and other legal events.

"The above works would require a longer time needed to complete the audit, and is expected to be finalised by May 2017," said CAP in response to Bursa Malaysia's request for clarification on the delay.

CAP said the group and its external auditors are now in the midst of discussions to come up with the milestones and actions that need to be undertaken by the company to issue and submit the AR, adding that the relevant information will be released as soon as it is finalised.

As for the group’s request to extend its financial year end to June 30, 2017 from Dec 31, 2016, CAP said its management decided on the extension to “achieve a more solid business performance to present to hareholders”.

CAP also drew attention to fluctuations faced by China's domestic steel and other raw materials market in 2016, which it said has resulted in an unfavourable market and slow domestic demand, affecting the auto parts segment.

As such, its subsidiary and manufacturer, marketer and trader of automobile chassis components, Quanzhou Fensun Automobile Parts Co Ltd (Fensun) "also suffered greatly", it said.

“The sales of Fensun [are] mainly from North China, [which] accounted for about 40% of its total sales. The northern climate changed drastically, especially in 2016. The usage of construction vehicles, in terms of frequency and cycle, has been greatly affected by this climate. In turn, it also affected the sales performance," it said.

Additionally, company operations and management deteriorated following the absence of former managing director Li Guo Qing, who has been on medical leave due to health reasons since early January 2016, said CAP.

“This resulted in a drop of the quality of the company’s products. The company incurred losses due to compensation and refunds to customers,” it said.

"The bad reputation of the group had also caused the sales of some dealers to drop. However, the company eventually managed to overcome the problems [and] Mr Li resigned as MD on Nov 18, 2016," it said.

CAP's share price settled 20% higher at three sen today, valuing it at RM40.86 million.