KUALA LUMPUR (June 24): China Stationery Ltd (CSL) will focus on turning around its business back to profitability this year, after a fire incident led to the China-based stationery maker to make a loss for the financial year ended Dec 31, 2014 (FY14).
CSL chairman Chan Fung said the fire that broke out at one of its plants in Fujian Province, China in April last year had seriously affected its production capacity, causing interruption to some of its operations.
The fire incident had ravaged 12,000 m2 of the total floor area of 16,500 m2 at production plant No. 4.
Chan said the group is in the process of winning back its old clients and has secured four of them to date.
"We are back to (normal) operation now. Four clients have come back to us," he told reporters after CSL's annual general meeting today.
The plant's maximum capacity is 40,000 tonnes.
In light of this, Chan said he is unable to give a growth projection for FY15, but that the group is unlikely to achieve the financial performance seen in FY13.
CSL swung to a net loss of RMB302.4 million (RM178.77 million) in FY14 as the fire damage had resulted in a loss of RMB518.76 million (RM37 million). This compared with a net profit of RMB388.03 million (RM229.4 million) in FY13.
CSL is involved in designing, manufacturing and selling a broad assortment of plastic filing and storage products. It carries its own brands namely "Sakura", "Nachi" and "Foldersys".
Chan also said the economic slowdown in China has impacted the group, but the management plans to up its advertisement and promotion spending this year to RMB90 million (RM54.31 million) from RMB70 million in FY13.
Apart from rebuilding its business back to the FY13 level, Chan said the more pressing matter for CSL is to have its Practice Note 17 (PN17) status lifted.
CSL had slipped into PN17 classification on July 8, 2014 after its external auditors Messrs RT LLP expressed a "disclaimer of opinion" on its accounts for FY13.
It has recently sought a one-month extension from Bursa Malaysia on the submission of its request for a waiver and implementation of a regularisation plan to lift its PN17 status.
CSL chief financial officer Chin Siew Weng said the group is working towards fulfilling Bursa's requirement to be lifted from the PN17 list.
"Bursa requirement for the upliftment of the PN17 status is that we need to make a profit for two consecutive quarters. Actually, we are half-way there.
"For the fourth quarter of 2014 and the first quarter of 2015, we have made a profit," Chin added.
As at 4.20pm, CSL (fundamental: 1.2; valuation: 0.9) shares were down 5.56% at 8.5 sen with 638,000 units changing hands, giving it a market capitalisation of RM110.95 million.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)