China Fibretech reported a staggering third-quarter loss as a result of disputed payments made to settle a claim.
It logged a net loss of 466.9 million yuan (S$96 million) for the three months ended Sept 30, reversing from a net profit of 1.9 million yuan in the same period last year.
This comes after the China-based dye maker emptied 99.9 per cent of its cash and bank balances, the bulk of which went towards paying compensation of 470.4 million yuan to three claimants in September.
Executive chairman and chief executive Wu Xinhua and non-executive director Wu Dezhi authorised the payments without the knowledge of the company's independent director or senior finance manager, China Fibretech said in September.
The company is left with a piddling 205,000 yuan in its bank account, down from 450 million yuan at the start of the year, according to its financial statements.
The payments were made to three customers who alleged in November last year that they "suffered substantial damages and financial losses" because products processed by the company's subsidiary did not meet specified requirements, resulting in decolouring of the end products.
AT A GLANCE
466.9 million yuan (-24,623.2%)
7.6 million yuan (-58.6%)
Revenue for the quarter came in at 7.6 million yuan, more than halving from last year's 18.3 million yuan. This was the result of a fall in the amount of fabric processed as well as a drop in the average fabric processing fee, the company said.
The company's sole independent director, Mr Low Wai Cheong, released a cautionary statement yesterday alongside the company's third-quarter results, saying he was unable to form a view on the validity of the three customers' claims.
He was also unable to ascertain whether the corresponding expense in relation to the claims in the group's financial statement was fairly stated.
Mr Low added that he could not determine whether the company did, in fact, hold about 467 million yuan in a Chinese bank account. This money was "purportedly used to pay the customers' claims".
He also pointed to the company's declining revenue, net cash outflows from operations and the losses it has incurred. These "indicate significant uncertainty on the... company's ability to continue as a going concern".
Advising investors to read the company's latest financial statements with caution, Mr Low said: "(The financial statements) were considered by the independent director without making any recommendation to the board for approval, and were considered by the board and authorised for release by the chairman and executive director of the company, Mr Wu Xinhua, solely."
Loss per share for the quarter was 52.02 yuan, from earnings per share of 0.21 yuan a year ago.
Net asset value per share was 2.4 yuan as at Sept 30, from 54.5 yuan on Dec 31 last year.