Extracted from Annual Report 2017
Risks and uncertainties continue to rise for the global economy, resulting in subdued activities within the domestic and global mining industry.
Navigating through the business challenges over the recent years, we started FY2017 with the goal towards improved business foundation and strengthen future viability.
Marked by various business and operating challenges, the past twelve months has been a transition phase for Fabchem China Limited ("Fabchem" or "the Group") as the Group disposed off our loss-making ammonium nitrate business unit, Hebei Yinguang Chemical Co. Ltd ("Hebei Yinguang"), and embarked on the upgrading of our boosters production facility.
With the disposal of our loss-making ammonium nitrate business, the Group has three core business segments, (a) explosive devices such as boosters; (b) industrial fuse and initiating explosive devices such as detonating cords and non-electric tubes; and (c) industrial detonators such as non-electric detonators and piston non-electric detonators.
Over the recent years, manufacturing operations within our niche and highly specialised industry were subjected to more stringent safety requirements from the relevant authorities due to incidents at unrelated production facilities in the same province.
As a result, the Group's two manual production lines of boosters had to cease production due to new safety directives.
Notably, the Group's second automated booster production line has successfully passed the relevant authorities' inspection and has been approved for trial production during April 2017.
With a curtailed production capacity with only one automated booster production line, this has directly led to a significant reduction in the Group's overall revenue for the financial year ended 31 March 2017 ("FY2017") as the product segment of boosters accounts for a significant portion of the Group's domestic and overseas sales.
However, the Group's overall financial performance in FY2017 was boosted by a gain of approximately RMB 30.1 million related to the disposal of our ammonium nitrate business unit, Hebei Yinguang.
The slowdown in China's economic growth has directly impacted the prices of minerals and metal commodities, leading to reduced mining activities in domestic and foreign markets. In addition, pollution and environmental issues in China have led to reduced mining activities in the domestic market.
Mining activities are closely linked to the Group's business environment as most of our commercial explosives products are used in such activities.
During FY2017, the Group's two product segments, industrial fuse & initiating explosive devices and industrial detonators, registered revenue growth of 3.2% and 6.8% respectively while revenue from the product segment of boosters declined 62.4% and as a result, the Group's revenue from continuing operations in FY2017 declined 25.1% to approximately RMB 148.5 million.
The Group's gross profit margin dipped to 15.0% in FY2017 due to the boosters production stoppage for the first two months of FY2017 as well as the impact of lower sales from our boosters products related to the transition of the boosters upgrading program that impacted production capacity. Lower selling prices of some of our product range due to increased market competition also contributed to the decline in the Group's overall gross profit margin.
With lower revenue recorded during FY2017, distribution expenses and administrative expenses decreased by 3.5% to approximately RMB 18.9 million and 19.6% to approximately RMB 31.2 million, respectively in FY2017. During FY2017, the Group's financial costs also dipped 6.5% to approximately RMB 3.5 million, due to the Group's lower bank lending rates.
The disposal of Hebei Yinguang resulted in a net gain of approximately RMB 30.1 million and together with other gains of approximately RMB 2.4 million, and as such, the Group's Earnings before Interest, Tax, Depreciation, Amortisation and Impairment ("EBITDA") in FY2017 increased 449.0% to approximately RMB 16.1 million from approximately RMB 2.9 million in FY2016. Overall, the Group registered a net profit of approximately RMB 1.0 million in FY2017.
As at 31 March 2017, the Group's total assets stood at approximately RMB 500.9 million with a gearing of 0.12x, while cash and cash equivalent position stood at approximately RMB 83.3 million.
Trade receivables, another major component of current assets, stood at approximately RMB 53.3 million as at the end of March 2017.
The disposal of Hebei Yinguang and the repayment of a RMB 30.0 million bills payables during FY2017 reduced the Group's total liabilities to approximately RMB 131.8 million as at 31 March 2017, of which the major components were attributable to trade and other payables of RMB 67.5 million and other financial liabilities of RMB 59.7 million.
As at the end of March 2017, shareholders' equity improved marginally to approximately RMB 369.2 million and net asset value per share stood at RMB 788.83 cents per share.
During FY2017, the Group recorded net cash utilised in operating activities of approximately RMB 41.4 million, net cash from investing activities of approximately RMB 24.0 million and net cash from financing activities of approximately RMB 9.6 million.
As a result, the Group recorded an overall net cash outflow of approximately RMB 7.8 million in FY2017.
Moving ahead, one of our continual strategic focus is to proactively look into new measures to further improve our operating cash flows and strengthen our liquidity position.
On behalf of the Board, I would like to extend my appreciation to our shareholders, customers, employees, bankers and business partners for your continued support, efforts and trust in Fabchem over the past year, even when faced with a challenging business and operating environment.
As announced previously, Mr Frankie Manuel Micallef and Mr Gregory John Hayne resigned as Non-Executive Directors and Mr Ong Tai Tiong resigned as Independent Director of the Company during FY2017.
Please join me in giving thanks to these three stalwarts for their outstanding contributions and dedicated service during their tenure in our Company.
To further strengthen the skills, experience, knowledge and independence of our Board, we would like to welcome Mr Tan Keng Keat as our Independent Director, whom was appointed on 18 August 2016.
I would like to acknowledge the contributions by fellow Board Members for their collective guidance, counsel and commitment in steering the Group through such challenging times and towards the long-term opportunities of this business.
As one of the leading commercial explosive manufacturer in China, we continue to be focused on utilising our competitive strengths and new technology to improve our products, raise our safety standards and continued valuecreation for our stakeholders.