S$0.056-CENG.SI
Management warned that the company expects to report a net loss for financial year ending Dec ’11.
Due to the high raw material costs (Rmb2,500/ton for methanol and Rmb1,500/ton for anthracite coal), coupled with other costs associated with the conversion of anthracite into methanol, it is not cost effective to produce methanol from anthracite coal which resulted in the very low utilization rate of their methanol plants.
Management is of the view that the cost of anthracite coal is unlikely to fall significantly for the remaining period of 2011 and as such the utilization rate of the company’s methanol plants will remain low and continue to drag the overall group performance into the red.
Since 4Q 2008, the company’s quarterly performance has been in the red, reducing its shareholders funds from Rmb1.73bln to Rmb1.39bln currently. With continued losses expected, shareholders funds will continue to be eroded.
Besides its weak fundamental performance, the continued de-rating of China companies listed overseas due to numerous high profile scandals over the years has also impacted the company, with the stock currently trading at (5.6 cents) or a fraction of its 2007 all time post listing high of $1.87 as well as Dec ’06 IPO price of 83 cents.
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