Frankly Speaking: A shocking loss

This article first appeared in The Edge Malaysia Weekly, on March 4, 2019 - March 10, 2019.
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Kian Joo Can Factory Bhd last Tuesday posted its first quarterly loss in its 34-year history as a public-listed company.

The can manufacturer reported a net loss of RM1.8 million in the fourth quarter ended Dec 31, 2018 (4QFY2018), compared with a net profit of RM46.89 million a year ago. As a result, its full-year earnings declined 81% year on year to RM17.25 million.

However,  revenue for the quarter and for the full year remained almost the same as the previous year. Nevertheless, Kian Joo says the weaker performance was mainly due to a drop in revenue and higher cost for tin plate and aluminium. The group also incurred a pre-operating loss in Myanmar of RM8.4 million in 4QFY2018.

Kian Joo’s first quarterly loss could not have come at a more pivotal time as Can-One Bhd has launched a bid to take the company private for RM917.2 million.

Recall that Can-One had on Feb 14 received the green light from shareholders at an extraordinary general meeting to extend a mandatory general offer (MGO) for the remaining 66.61% stake in Kian Joo it does not own at RM3.10 apiece.

This is despite minority shareholders’ concerns over Can-One’s risk of gearing up to fund the privatisation exercise, given that Kian Joo’s earnings and dividend payouts have been declining in recent years. Their concerns seem justified as Kian Joo reported a shocking set of results two weeks later.

As for Kian Joo’s minorities, lower dividends are to be expected as management would justify the move with the need to conserve cash.The poor set of results may even affect minorities’ decision on whether to accept the MGO. With Kian Joo reporting its first ever quarterly loss now, shareholders may be tempted to accept it. But should they?

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