China Hongcheng suffers third straight year of losses; stock may be put on SGX watchlist

The financials of China Hongcheng Holdings have continued to worsen, prompting the company to flag a warning to shareholders. The company today reported a widening of its full year net loss to 81.9 million yuan from 68.2 million yuan previously.

Revenue fell by 3.4 per cent to 467.6 million yuan for the year ended June 30.

This was a result of intense price competition and decrease in sales volume.

In a separate statement, China Hongcheng noted that it had posted pretax losses for three consecutive years. Its market value has also fallen to $5.6 million.

Under the listing rules, an issuer will be put on a watchlist by the Singapore Exchange (SGX) if it suffers three years of continuous losses and has a market value of less than $40 million.

Loss per share worsened to 30.6 fen from 25.45 fen previously while net asset value per share fell to 82 fen compared to 1.13 yuan a year earlier.

As to its prospects, China Hongcheng said the weak overseas markets such as the United States and the European Union, competition from manufacturers in India, Pakistan and other Asian countries, which have access to lower cotton prices, and the general appreciation of the renmimbi continued to erode the cost competitiveness of China textile manufacturers.

Re-focusing on the domestic market, the group is still facing uncertain factors such as government policies and market fluctuations.

As China textile manufacturers are minimising their inventories levels, China Hongcheng's revenue has been affected.

Meanwhile, high operation and finance costs have further eroded profitability.

"Although the company has stepped up its marketing efforts in South-East Asia and continues to focus on its operational efficiency and expands its local market by strengthening co-operations with the local famous brand names, the next twelve months is expected to continue to be tough and challenging," it said.