Plastoform to close Shenzhen production plant; plans to liquidate unit

SINGAPORE - Manufacturing service provider Plastoform Holdings announced late on Monday (Sept 17) that the group will be shuttering its production facility in Shenzhen as parts of efforts "to restructure its business and improve its operational efficiency and cost-effectiveness".

Following the production closure, the group intends to submit an application to the court in China to liquidate its wholly owned Shenzhen subsidiary.

The group said that it faced challenges in respect of debt collections from its major customers and insufficient sales orders to sustain its operations.

"With the dynamic change in market during the last few years, sales orders and business have changed to high mix and low volume. It is not justified to keep a big scale manufacturing operation for small volume of business," said the group.

Without the manufacturing site, there would be cost savings in terms of monthly fixed overhead, the group added.

The group plans to transform its manufacturing-oriented business to project-oriented business with the support from multiple contract manufacturers. With a project-oriented business model, the group would pay manufacturing cost associated with sales order which would better reflect the actual project profit and loss performance for each undertaken project, said Plastoform Holdings.

The production closure is expected to result in the following non-recurring expenses which are expected to have material impact to the group's financial results for the financial year ending Dec 31, 2018.

Following the commencement of the subsidiary into liquidation, the remaining assets would be realised and any fund from realisation would be repaid to staff for layoff compensation, government's expenses and payout to suppliers. It is expected that there would be no residual value to be refunded to its immediate holding company, Plastoform Industries.

Net assets value as at Dec 31, 2017 and as at June 30, 2018 is positive HK$3.7million (S$648,100) and negative HK$24 million respectively. The group's consolidated net assets value would be increased by HK$11.7million (after including the loss of inter-company balances) after the closure in Shenzhen. It would expect an increase in consolidated net assets value of the group for FY2018.

The monthly loss for the first half was around HK$2 million to HK$3 million after taking out the one-off impairment loss on accounts receivable. After the facility's closure, it would expect a reduction of loss in consolidated results, of about HK$2 million per month.

There would also be about HK$1 million of one-off professional fee and supporting fee for liquidating the Shenzhen subsidiary.