Sino Techfibre answers SGX’s queries

One of the questioned figures was the 300% increase in other liabilities.

Sino Techfibre said:

Query 1
We noted that financial expenses had increased by 49% from RMB5.8 million for 3Q2010 to RMB8.7 million for 3Q2011. Please reconcile this increase with the significant fall in bills payable and short term bank loans as at end September 2011 compared to end December 2010.

Response to query
1) In 3Q2010, the interest rate for the bank loan was ranging from 5.31% - 5.841%. In 3Q2011, the interest rate for the bank loan was ranging from 6.56%-7.216%. Besides, the bank loan in 1Q2011 is RMB211.0 million (1Q2010: RMB110.5 million), which results in the higher financial expenses in 3Q2011. For the bills payable, the bank charges on a fixed rate of 0.05% on the bills amount.

Query 2
We noted the increase in inventories by about 188% from 91.9 million as at end December 2010 to RMB266 million as at end September 2011. Please provide the breakdown of the broad categories of inventories and provide further details to explain the variance.

Response to query
2) The increase in raw materials was due to prepayment made for raw materials was transferred to inventories. Since our company policy change in August, we don’t make prepayment to the suppliers. The increase in finished goods was due to the some customers failed to fulfil their obligations and we cannot delivered our goods to them.

Besides, there are also some finished goods which cannot meet the quality demand from the customers and cannot be sold. As a result, there’ll be some provision of obsolete inventories in 4Q2011.

Query 3
We note the increase in other liabilities (attributed to VAT payables) by about 300% from RMB14.7 million as at end December 2010 to RMB59.5 million as at end September 2011. Please reconcile this increase in VAT payables with the fall in revenue and cost of goods sold for 3Q2011 compared to 3Q2010.

Response to query
3) The increase in VAT and other tax payables was due to some finished goods was delivered to the customers but we have not issued the sales invoices as agreed with some of the customers. The amount of sales invoices not yet issued was RMB354 million.

We have recorded these delivered goods as sales and at the same time recorded the VAT payables. Last year, all the sales invoices was issued and we paid the VAT in each month.

The increase in advances from customers was due to more credit control on the customers because of the deterioration in the business environment.

Query 4
Under paragraph 9 of Appendix 7.2, the Company must disclose whether the actual results for 3QFY2011 are in line with commentary in paragraph 10 of the previous quarter’s results. Please disclose accordingly.

Response to query
In 3Q announcement point 9, it should be amended to read as follows:
The actual results for 3QFY2011 are in line with the commentary in paragraph 10 of the financial results announcement for 2QFY2011.