China Shoto (LON:CHNS) -need re-charging!
Following on from its AGM statement on 22nd June the leading Chinese battery producer and the largest supplier of back-up batteries to China's telecommunication operators updated the market today with an announcement with the somewhat gloomy title of ‘Factory Closure & Trading Update’.
We warned previously after the AGM statement (Commentary 22nd June 2010) that things weren’t looking too good and it appears they remain tough.
The factory closure itself relating to a business in which CHNS only has a 59% interest and which accounts for approximately 3% of the Group’s total production capacity doesn’t look that significant. However, it remains a ‘closure’ of a business that should be going through expansion, rather than the contraction that is now clearly the case.
More importantly, since the AGM statement trading conditions have unsurprisingly remained challenging and CHNS acknowledges that the effect of lower levels of investment in infrastructure by China’s major telecos has been felt across the battery manufacturing industry. The results for the 6 months ended 30th June will indicate a decline in revenue and profitability of approx 11% and 12% respectively, which actually appears to be an improvement relative to the 15% fall over the first 5 months stated previously. In its defence CHNS has experienced meteoric growth since coming to AIM in Dec 2005. The AIM Admission doc indicated sales…