InnoTek breaks year-and-a-half loss streak

Achieves marginal profit this quarter.

SGX Mainboard-listed InnoTek Limited (InnoTek) announced that it achieved a marginal profit of S$32,000 for the quarter ended 30 June, 2013 (Q2’13) — reversing a loss since Q4’11 —on the back of improved operating efficiencies due to consolidation and restructuring since Q1’12 and a one-off gain of S$0.4 million on disposal of a factory in Donguan, China.

While revenue from the precision metal components specialist’s continuing operations declined 17.9% or S$12.7 million to S$58.3 million from S$71.0 million in Q2’12, its wholly-owned Mansfield Manufacturing Company (MSF) recorded a S$0.1 million profit in Q2’13, reversing a loss of S$1.5 million (excluding S$0.6 million loss due to the disposal of Mansfield Industrial Co. Ltd (MICL)) a year earlier.

Revenue of the Group’s Precision Components and Tooling businesses declined S$6.1 million to S$53.3 million from S$59.4 million a year earlier while that of the Precision sub-assembly segment declined by S$6.6 million to S$5.0 million from S$11.6 million.

Sales continued to be impacted by slower economic growth in China and JapanChina political tensions which affected major Japanese customers of office automation, consumer electronics products, and TV components. However, this was partially offset by higher demand for automotive products, mainly from nonJapanese customers.

Following consolidation and restructuring effort since Q1’12, the Group broke even in Q2’13, reversing the S$2.2 million loss in Q2’12. The reorganisation lowered administrative expenses by S$3.4 million, or 30.2%, to S$7.9 million from S$11.3 million in Q2’12. Apart from consolidating two Dongguan plants and freeing up the old rented Suzhou plant in FY’12, the Hong Kong premise was also sold in Q2’13.

Additionally, deployment of excess equipment to capture new business opportunities in the newly secured TV frame products mitigated losses in Q2’13.

For the six months ended 30 June, 2013 (“1H’13”), the Group’s net loss from continuing operations narrowed to S$1.4 million from S$6.0 million in 1H’12 despite the decline in revenue of S$24.9 million to S$116.4 million from S$141.3 million in 1H’12.

The Group’s Q2’13 earnings per share improved to 0.01 cent compared to a loss per share of 0.99 cent in Q2’12. Net asset backing per share as at 30 June 2013 stood at 71.2 cents compared to 70.0 cents as at 31 December 2012.

The Group’s financial standing remains healthy with a net cash position of S$18.0 million or 8.00 cents per share, comprising cash and cash equivalents of S$25.8 million less total borrowings of S$7.8 million as at 30 June 2013. The increase in market value of the 15 million Sabana Reits shares held, from S$1.140 as at 31 December 2012 to S$1.155 as at 30 June 2013, resulted in a fair-value gain of S$0.2 million recognised under other comprehensive income.

Group Managing Director of InnoTek, Mr. Yong Kok Hoon, commented, “The Group has continued to pursue cost efficiencies as part of efforts to return to profitability. However, the manufacturing sector in China has slowed, along with economic growth, affected by rising operating costs, particularly wages. The Group also faces ongoing price competition from local enterprises and producers of other countries, especially South Korea.”

Despite the improved performance, the Directors remain cautious about the Group’s outlook for Q3’13 and 2H’13. The Group will continue to streamline its operations to achieve further cost efficiencies.