19th Jan 2015 09:29
LONDON (Alliance News) - Sorbic International PLC Monday said it's pretax loss significantly narrowed in the last financial year despite revenue taking a slight tumble as it continues to try and recover funds owed to the company by the chief executive of its Chinese subsidiary.
Sorbic shares dropped 19% to 2.53 pence per share on Monday morning.
For the year ended September 30, 2014, the company reported a pretax loss of GBP219,148, significantly narrower than the GBP6.1 million loss made a year earlier. The loss last year was caused by a USD6.1 million, one-off impairment charge.
Revenue declined slightly to GBP14.1 million from GBP14.6 million, primarily due to foreign exchange losses. All the company's revenue is generated by its wholly owned subsidiary, Linyi Van Science and Technique Co Ltd, with 91% of sales coming from exports to the US and sales in China.
Sorbic said that its subsidiary's operating margin was hit in the second half of the year due to price fluctuations for potassium solbate. For the full year, the subsidiary's operating margin dropped to 9.8% from 12.9% in 2013.
Sorbic acid and potassium solbate prices were stronger at the beginning of the financial year but softened for the remainder and Sorbic said the increases to its cost of sales have began to decline, hopefully leading to the company recovering some of its gross margins.
Sorbic had GBP6.9 million in cash at the end of September, reflecting the positive cash flow from Sorbic's operating subsidiary in China, combined with a lower inventory level, it said in a statement.
"The board is pleased that the group continues to be cash generative. Demand for the group's products remains strong and the board remains focused in bringing the group's operations back to a normal state of activity in 2015," said Non-Executive Chairman John McLean.
"Significant progress has been made on all fronts, but there are challenges in the coming year which, if not resolved quickly, could prove as difficult as last year's," he added.
In August 2014, Sorbic said it had extended the repayment deadline for GBP3.6 million in outstanding loan stock owed to the company to the end of 2014. The balance remains unpaid and in default and Sorbic have recently visited China to expedite the redemption of the outstanding loan stock, it said.
Discussions continue concerning the loan stock, including with the Chief Executive of Linyi Van Science and Technique, Wang Yan Ting. Sorbic have appointed eCFO, a Chinese business consultancy company to try and recover the funds, it said in a statement.
In October and December, Wang confirmed and agreed to transfer the outstanding funds, but Sorbic are still awaiting for the repayment, said the company. The subsidiary had a cash balance of GBP7.2 million at the end of November.
"Mr Wang's reluctance to engage with the board has contributed to a challenging year," said McLean.
By Joshua Warner; [email protected]; @JoshAlliance
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