KUALA LUMPUR: China Stationery Ltd (CSL) has wrapped up its financial year 2014 ended December (FY14) with a net loss of RM172.54 million or 13.88 sen per share, compared with a net profit of RM204.72 million in FY13. Full-year revenue plunged 63.8% to RM343.93 million from RM949.51 million a year ago.

The China-based, Bursa Malaysia-listed stationery maker attributed the sharp decline in revenue to the decrease in sales of its patented and non-patented products.

It also said sharply lower sales and a fire that ravaged its manufacturing plant in Fujian, China, in April last year resulted in the group recording losses.

According to CSL, the production capacity of the affected plant represented 40% of the total capacity of all its plants at that point.

Financial losses related to the fire were reflected in the group’s FY14 results, where “other expenses” shot up to RM296.01 million from RM21.12 million previously.

With the fire said to have affected its orders, hence sales, CSL has seen its gross profit more than halved to RM159.66 million in FY14, from RM419.41 million previously. That’s before accounting for other expenses and overheads that eventually pushed it to record major losses of RM172.54 million.

As a result of poor operational performance and the fire, the group also saw a substantial reduction in its net cash position to RM995.85 million at the end of 2014, from RM1.25 billion a year earlier.

Net cash used in operating activities amounted to RM74.21 million, while net cash used in investing and financing activities amounted to RM243.8 million (for purchase of equipment and machinery) and RM32.55 million (for repayment of borrowings).

In the latest quarter, the group continued to see sharp deterioration in operating performance in the three months ended December 2014, with net profit halved to RM16.1 million from RM31.4 million previously, while revenue plunged 82.1% to RM36.31 million from RM203.22 million.

Going forward, CSL foresees a challenging year, given the current economic environment and reduced orders from customers that were affected by the fire.

“The group expects its growth to continue to be underpinned by our innovative patented and non-patented products. To help us take on these challenges ,we will be investing in research and development in order for us to come out with more innovative products as well as exploring new markets to further expand our product presence,” it said in a filing with Bursa.

CSL also outlined currency exchange, a slowing European economy, and a shortage and sudden price increase in polypropylene materials, as “factors that are likely to influence its performance this year”.

CSL’s stock closed unchanged at eight sen yesterday, giving it a market capitalisation of RM98.62 million, which is less than a tenth of its net cash of RM955.85 million as stated in the balance sheet.

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This article first appeared in The Edge Financial Daily, on February 12, 2015.