KUCHING: Sarawak Cable Bhd (SCB), which is currently in the midst of negotiating with its creditors for a new restructuring scheme, has reported widening losses on shrinking sales.
In second quarter ended November 30, 2023 (2Q2023), SCB suffered group net loss of RM35.82 million against RM11.74 million in 2Q2022 as group revenue fell to RM107.5 million from RM146.1 million or down by RM38.6 million.
Losses per share worsened to 8.98sen from 2.94sen previously.
In the six-month period to Nov 30, 2023 (1H2023), SCB incurred group net loss of RM48.54 million (1H2022:-RM12.28 million) as revenue plunged to RM199.5 million (RM325.4 million).
In 1H2023, the group derived 84.6 per cent or the bulk of its revenue of RM168.9 million (1H2022:RM300.2 million) from the sales of cables and wires but the transmission lines construction segment recorded higher revenue of RM21.1 million (RM15.7 million) and the sales of galvanised products and steel structures also improved to RM9.51 million (RM8.93 million).
The cables and wires segment reported higher loss of RM12.7 million (-RM7.65 million) and the transmission lines construction segment saw its loss soaring to RM27.2 million (+RM245,000).
The galvanised products and steel structures segment reduced its loss to RM1.21 million (-RM1.79 million).
The helicopter services and corporate segment, which reported zero revenue in 2Q2023 (RM601,000), registered loss of RM3.67 million (-RM3.62million).
According to SCB, as the group’s restructuring programme was previously rejected by its creditors, it is now in the midst of negotiating with the creditors to come up with a new restructuring scheme.
“While this is in progress, our credit and financing lines are on a stand-still. Therefore, we are currently operating under a lower capacity using all internal resources in the group. This has resulted in a reduced production and lower revenue recorded.
“Since the production has reduced, this has led to a higher unabsorbed overhead, resulting in a segment loss for the reporting period,” SCB, a PN17 company, said in explanatory notes to its financial results.
SCB said the market demand for the group’s cables and wires remains strong and the group continues to have a good book orders in hand.
Reviewing the performance of the transmission lines construction segment, the company said the progress of all projects was also affected by the stand-still of its financing lines.
“Despite that, we are making every effort to ensure that all on-going projects are to be completed within the committed construction period.”
SCB said the group had entered into a share subscription agreement on September 7, 2023 to dispose of wholly-owned subsidiary — Trenergy Infrastructure Sdn Bhd (TISB), and the deal is expected to be finalised by 3Q2024. The business of TISB represents the group’s transmission line construction segment.
SCB said the group’s galvanised products and steel structures segment was also operating using internal resources as its financing lines are on stand-still.
“This has resulted in a reduced operation and therefore, the low revenue was insufficient to cover the manufacturing and operating expenses leading to a segment loss recognised for the reporting period.
“Market demand for products under this segment has started to pick up gradually. The group continues to explore opportunities to supply and sell its products and services in Malaysia and especially in Borneo Island,” it added.
Commenting on prospects going forward, SCB said: The group’s cables and wires segment book orders remain high, with an encouraging increase in book order for galvanised products and steel structure segment, and this will contribute positively to the group.
“The group is currently in the midst of negotiating with its creditors for a new restructuring and the group is confident that with this restructuring in place, it will rehabilitate the financial performance of the group.”
On Dec 12, 2023, SCB announced that Serendib Capital Limited has emerged as a white knight for the company and the latter has submitted its interest in performing a resuscitation exercise for the cables and wires manufacturer.
SCB said Serendib Capital, an experienced UK-based investor with over two decades of experience in advisory and financial asset restructuring in South Asia, has prepared a RM250 million war chest to be used to restructure and pay down SCB’s outstanding creditors as well as for an injection of capital into the company to cater for the growing customer demand for infrastructure grid development and high voltage cables.
Updating the winding-up petition served by OCBC Bank Malaysia Bhd against its subsidiaries — Leader Cable Industry Bhd and Universal Cable (M) Bhd — in the Kuala Lumpur High Court on October 4, 2023, SCB said the company had appointed a legal counsel and sought preliminary legal advice and intends to challenge and oppose the petition and the appointment of an interim liquidator.
The winding up petition was heard by the court on December 13, 2023 and the court had decided to adjourn the decision until March 4, 2024.
According to SCB, Leader Cable and Universal Cable are indebted to OCBC Bank about RM46.2 million and RM28.4 million respectively as at September 15, 2022 with interest that continues to accrue to the petitioner.
