FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2009
Consolidated Income Statement
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Balance Sheet
Review of Performance
First Quarter 2009 ("1Q2009") vs First Quarter 2008 (1Q2008")
(a) Sales for 1Q2009
In light of the global economic downturn, the Group's overall sales in 1Q2009 slid by RMB45.8 million (24.3%) to RMB142.8 million compared to the same period last year.
Sales of electronic tuner components ("ETC") decreased by RMB33.2 million (28.0%) from RMB118.6 million in 1Q2008 to RMB85.4 million in 1Q2009. The decrease in sales of ETC was due to reduced orders from our major customers.
The automotive segment registered the largest decline in sales among all business segments, down 45.5% from RMB23.7 million in 1Q2008 to RMB12.9 million in 1Q2009, as a result of the economic crisis.
Sales of other segment declined by 4.0%, from RMB46.3 million in 1Q2008 to RMB44.5 million in 1Q2009, mainly attributed to lower sales in telecommunications parts, which was offset partially by an increase in sale of office automation products.
(b) Gross Profit for 1Q2009
As a result of the lower sales, gross profit decreased by 26.1% from RMB55.8 million in 1Q2008 to RMB41.2 million in 1Q2009. Overall gross profit margin decreased slightly by 0.7 percentage points from 29.6% in 1Q2008 to 28.9% in 1Q2009.
Gross profit margin for ETC declined by 2.1 percentage points from 37.8% in 1Q2008 to 35.7% in 1Q2009. This was mainly attributable to higher labour costs and lower utilization rates due to lower productions. Although raw material prices have decreased, the Group has not benefited as the Group is still using stock produced at a higher price.
Gross profit margin for automotive segment increased by 9.6 percentage points from 18.3% in 1Q2008 to 27.9% in 1Q2009, mainly due to lower nikel prices and a reduction in the labour force.
Gross profit margin for our other segment increased by 1.8 percentage points from 14.3% in 1Q2008 to 16.1% in 1Q2009. The improvement was mainly attributable to an improved product mix.
(c) Expenses for 1Q2009
Overall expenses decreased by RMB4.8 million or 11.6% from RMB40.9 million in 1Q2008 to RMB36.1 million in 1Q2009 mainly attributable to the following:
- lower distribution expenses of RMB1.3 million mainly due to reduced rental of sales offices;
- lower administrative expenses of RMB2.7 million mainly due to lower education expenses of RMB4.4 million and foreign exchange loss of RMB1.9 million. The decrease was offset partially by higher staff cost of RMB3.1 million and travelling expenses of RMB0.5 million; and
- lower interest expense of RMB0.4 million due to lower bank loan.
(d) Profit before and after income tax for 1Q2009
Profit before income tax declined by RMB13.8 million or 62.5% from RMB22.0 million in 1Q2008 to RMB8.2 million in 1Q2009. The decrease was mainly due to lower revenue as explained above.
The Group's effective tax rate for 1Q2009 was lower than the corresponding period last year due to the tax holiday period enjoyed by one of our subsidiaries in the PRC.
Consolidated Balance Sheet
There was no material variance for the Group's balance sheet items between 31 March 2009 and 31 December 2008 except for the following:
- Trade receivables decreased by RMB36.0 million mainly attributable to lower sales and the Group's effort in strengthening its collection of accounts receivables.
- Property, plant and equipment decreased by RMB8.9 million mainly due to depreciation charge of RMB11.0 million which was offset partially by additions of RMB2.5 million.
- Other payables decreased by RMB13.1 million mainly due to a reduction in accrued salary and bonus payables of RMB12.2 million and lower accrual for operating expenses of RMB8.9 million.
- Borrowings decreased by RMB46.7 million due to full repayment of loan during the first quarter of 2009.
Commentary
With the numerous stimulus packages being introduced by central governments around the world, the global economy is gradually improving. The Group's sales showed a first sign of improvement in March 2009 and we expect our order book to improve in tandem with the improved economic condition. We are, however, cautious over the following:
(a) The prices of nonferrous metals remain unstable, and as it is a key raw material for many of the Group's activities, it will have an impact on profit and revenue.
(b) The volatility of exchange rates also contributes to market uncertainties and thereby could affect the profit and revenue of the Group.
Moving ahead, the Group is placing greater emphasis on the technological capabilities of plastic injection moulding, which are necessary for enhanced product quality and greater production efficiency. The recent developments into the original equipment manufacturing (OEM) sector will also stimulate greater growth for the Group. Aside from building on current capabilities, the Group will also focus more on research and development of new product lines to gain greater competitive advantage.
In line with its strategies to boost core technological competencies and diversify into higher technology industries, the Group is also looking at suitable businesses for mergers and/or acquisitions. The recent proposed acquisition of MAHK Co.,Ltd (Japan) is a synergistic one and will allow the Group to enhance its precision moulding capabilities, production capacity and will also pave the way for ventures into the fields of higher value-added lens, camera module and pick-up assembly.