6 May 1999: A decline in product prices and exceptional charges have driven H share Luoyang Glass of China to a worse than expected net loss of 363.36 million yuan last year, according to a recent pre…
6 May 1999: A decline in product prices and exceptional charges have driven H share Luoyang Glass of China to a worse than expected net loss of 363.36 million yuan last year, according to a recent press report. It was the company“s second successive year in the red, following a net loss of 219.43 million yuan in 1997. The loss could affect the future of the company“s management, the report said. Beijing brought in rules recently that could see managers of state-owned enterprises – including H shares – dismissed if the companies make two years of losses due to bad management. However, chairman Guo Xiaohuan said he had not been notified of any possible management changes. The company“s loss was mainly attributable to sharp falls in product prices in recent years due to oversupply, he said. Luoyang Glass booked an exceptional loss of about 180 million yuan, including about 36.41 million yuan for money deposited with financially troubled Guangzhou International Trust and Investment Corp (Gzitic). This accounted for non-recovery of 25% of 145 million yuan deposited with Gzitic. The company also made provisions of about 74.44 million yuan for receivables and 61.83 million yuan for bad debts for trade debtors. It reported about 5% increase in turnover to 624.12 million yuan in the period. Guo said the firm should be able to return to profitability this year due to a recovery in product prices, cost controls and increased production. Prices had bottomed last year, after declining a further 9% from 1997. The average price for float glass rebounded from 65 yuan a weighted case last year to 67 yuan each in the first quarter, a level which would allow the company to make a profit. Guo expected the price would increase further to about 70 yuan in the second half. He said Beijing“s plan to cut production by 30 million weighted cases by next year, from about 170 million last year, and to suspend the development of new production capacity for three years, would help bring about a balance in supply and demand. The company is expected to produce 650,000 tonnes of float glass this year, up from 547,000 tonnes last year. Guo said he did not expect that the company would need to make more provisions for the Gzitic deposit.