Published November 6, 2008

More profit warnings issued

By LYNETTE KHOO
Email this article
Print article
Feedback

MORE companies have issued profit warnings amid the global economic slowdown.

Of at least five companies that issued warnings yesterday, three were Chinese firms hurt by depressed margins, higher costs and slower demand in China.

In a filing with Singapore Exchange, China Auto Electronics Group said it may not be profitable for the third quarter ended Sept 30. It cited a slowdown of growth in China's auto industry and continued losses in newly acquired US subsidiaries, 'although the losses were substantially reduced as the working capital issue was resolved in the third quarter'.

Chinese property developer Pan Hong Property Group warned of an operating loss for the third quarter caused by a substantial decline in revenue, as well as in other income and gains amid the current slowdown in the property market in China.

China Powerplus guided for lower earnings for its third quarter ended Sept 30 from a year ago, citing pressures from several fronts. During the quarter, it saw higher production costs triggered by higher inflation and R&D activities. Adding to the costs was power supply disruption during the Beijing Olympic Games due to power supply rationing in Shandong province and the resulting repair and maintenance work. Demand was dampened by cautious spending among its customers while its margins from export sales were hit by the stronger yuan against the US dollar.

Singapore firm San Teh warned of a loss for the third quarter due mainly to weaker performance of its cement operation in China. In its second quarter results, the group had said it expected the slowing Chinese economy and measures to fight inflation to adversely affect construction activities there and hence the demand for its products. The group had also expected escalating cost pressures to persist.

Citing 'very challenging business conditions', Giant Wireless Technology said it is expecting to record a signficant loss for the first six months ended Sept 30 due to a substantial decline in revenues. It has headquarters in Hong Kong, manufacturing facilities in China and counts global names such as Motorola, Plantronics and Olympia among its clients.

This spate of negative news came as no surprise to analysts, who note that problems of high production costs, slowing demand and depressed margins have been persistent issues before the start of the third quarter.

'Q3 earnings could be bad, but going forward, I foresee more downgrades for the full-year and next year,' said Westcomb Securities research head Goh Mou Lih. Export-oriented companies would be worst hit, he added.