By JOYCE HOOI
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A FEW months after launching Swarovski crystal-embedded sofas, Lorenzo International issued a less-than-sparkling profit warning yesterday.
The furniture retailer is expecting to post a loss in its H1 2009 results for the six months ended June 30, 2009, citing losses from its operations in China, weak export sales and one-off provisions from the closure of its operations in Australia.
The group's China and Australia markets contributed to 9.3 per cent of its revenue in FY2008.
'Whilst the underlying business in Singapore, Malaysia and Taiwan has surprised us by doing better than expected, the board has decided to be conservative and to make such provisions as is required,' said James Goh, executive chairman of Lorenzo.
'The largest provisions are one-off provisions relating to the shutting down of our loss making Australian operations, for the opening of the new China factory and for other provisions such as tax and possibly for fair value impairment.'
In FY2008, Lorenzo posted a 7.4 per cent increase in revenue to $94.8 million, but a rise in cost of goods sold took its toll on the bottom line. Net profit for the year fell 4.2 per cent to $3.4 million.
The company remained confident about its prospects for the second half of the year, noting that its markets in Malaysia, Singapore and Taiwan continue to exceed expectations. The three markets contributed 60.8 per cent of group revenue in FY2008.
'In China, we are reorganising our network and reducing LRS stores. We are hopeful that our initiatives will result in Lorenzo returning to profitability in H2 2009,' said Mr Goh.
As of March this year, Lorenzo had 20 licensed stores and three self- owned ones in China.
The group also announced yesterday that its group managing director, Ng Soon Heng, would be retiring from his position for personal reasons, with effect from yesterday.
Lorenzo's stock price closed a cent lower to 7.5 cents in trading yesterday.
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