Published July 15, 2009

Four China-based firms issue profit warnings

By EMILYN YAP

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AT LEAST four more companies have issued profit warnings, with the economic downturn cited as a common factor.

The four which sounded the alarm on their half-year results were China-based companies. Three of them expect to incur losses while one foresees lower net profits.

China Kangda Food Company said that it could report a lower unaudited net profit for the six months ended June 30, 2009, compared with the same period last year. Back then, it took in net earnings of 60.2 million yuan (S$12.9 million). The economic downturn shaved demand for rabbit meat in the European Union as well as for processed foods in Japan. Also, keen competition led to an excess supply of chicken meat products in China. These factors contributed to the projected drop in takings, China Kangda explained.

A second firm in the food industry, Oriental Food, expects to incur a loss for the first half ended Dec 31, 2009. It said that the downturn dampened average selling prices and sales volumes, leading to 'significantly less' total revenue compared with a year ago. A writedown of inventory - bought in the previous financial period when food prices were rising - could also hit the bottom line. Oriental Food had seen better times - for the first half ended Dec 31, 2008, it took home 428,000 yuan.

Another food company, China Angel Food, also projects a net loss for the first half ended June 30, 2009. In contrast, it had reported a net profit of 986,000 yuan in the same period last year.

Consumer and corporate sales fell because of the economic slowdown, and not only that, the business of selling technical know-how in mooncake production 'declined significantly', China Angel Food said.

Fastube, a steel piping company, expects to incur a net loss for the first half ended June 30, 2009. It had made a net profit of 5.5 million yuan a year ago.

The downturn, coupled with stiff competition, led to a drop in sales turnover and margins, the company said. The lower turnover also affected other operating income, mainly from the sale of scraps.