KUALA LUMPUR (Nov 14): K-One Technology Bhd slipped into the red with a net loss of RM2.36 million in the third financial quarter ended Sept 30, 2016 (3QFY16), as its revenue more than halved upon exiting the mobile phone accessories business.

Its revenue came in at RM19.4 million, down 53% from the RM41.6 million it achieved in the previous corresponding period, when it recorded a net profit of RM4.34 million.

The current quarter's loss was mainly due to the impairment on tooling of RM1.6 million following the group's move to exit the mobile phone accessories' original design manufacturing (ODM) business, as well as higher costs of sales from increased material and labour costs.

The rise in sales and labour costs stemmed from the revised minimum wage of RM1,000 per month (previously RM900 per month) from July 1, it said. Foreign exchange gain has also been subdued compared to last year when the US dollar was moving towards new highs.

For the nine months ended Sept 30, 2016 (9MFY16), K-One posted a net loss of RM2.35 million against a net profit of RM7.38 million in 9MFY15, as revenue dropped 45.9% to RM60.63 million from RM112.15 million.

The lower revenue was due to weaker sales from its network camera segment besides the effect of phasing out its mobile phone's accessories business.

The exit from the mobile phone accessories' ODM market is in line with its strategy to move away from the highly competitive business margin which is severely compressed, said K-One.

Moving forward, K-One said despite the improved sales performance seen in its consumer electronics segment for the current quarter, it expects sales growth for the remainder of FY16 to be subdued in view of the current lacklustre and uncertain global economy.

It said it is working on new ventures involving a diversification into the medical/healthcare, automotive, electronic wearables, consumer electronic lifestyle and Internet of Things markets, where higher margins, longer product lifecycles and upwards industry dynamics can be yielded. However, it said contributions from these ventures may be "restrained" until the global economy finds a more stable footing.

For now, it expects the current year's business to consolidate and earnings to be adversely impacted.

Over at Bursa Malaysia, K-One's share price settled half sen or 3.1% lower at 15.5 sen, valuing it at RM73.26 million.