Hong Leong Asia Ltd. - MANAGEMENT REPLY: Did Xinfei launch any new products in Q4?

25/1/2013 – Hong Leong Asia (HLA) will report a loss for the financial year 2012.

That's because it will book an impairment loss of RMB290 mln or S$57.4 mln arising from its consumer products unit, Xinfei.

In addition, the Chinese tax authority has disagreed with Xinfei on the application of the high tech incentive status granted for FY08 and FY09.

Hence, HLA will have to pay the Xinxiang National Tax Bureau RMB35 mln or S$6.9 mln.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. Did Xinfei launch any new products in Q4?

HLA highlighted in Q3 that Xinfei was expected to launch new products in the subsequent months.

But it also said Xinfei’s performance would continue to be challenging.

It also said that Xinfei had engaged an independent qualified valuer to perform a valuation of its fixed assets for the purpose of impairment assessment.

But it comes as a surprise that this valuation would lead to losses.

However, HLA has a cash balance of S$1.2 bln, which should be more than enough to bear it.

Question

2. How much more will Yuchai’s gross margin be affected?

Gross margins in Xinfei and Yuchai were affected by lower average selling prices.

In addition, at Yuchai there was a shift in sales mix to lower-margin 4-cylinder engines compared to the same quarter last year.

Management reply: After discussion with management, we are currently in the "blackout period" thus we are unable to disclose any financial information at this point of time.

We thank management for responding.

Sources & further information

Sources

Statutory disclosure


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