25 Jan 2005

Profit Warning

The weaker position in the final quarter of FY2004 is attributable to the impact of the economic soft landing in China. As a result of the measures implemented by the Chinese government, the second half of FY2004 saw credit tightened across the entire country. Reacting to the impact of this credit tightening, many customers in China took immediate steps to reduce their inventory levels and increased their reliance on suppliers' credit. This impacted the Group and eventually caused a drop in its sales and margins in the final quarter of FY2004.

Responding to the changes in China, the Group expects that market consolidation will be setting in shortly. The anticipated consolidation will present an opportunity for the Group to expand its market share in China. Additional staff force, especially in the areas of sales and marketing, were recruited in the 4th quarter of FY2004 to step up the Group's marketing efforts.

The need to remain prudent amid the challenges posed by weakening business conditions, coupled with the necessity to capitalize upon the opportunity to garner increased market share during the 4th quarter left their impact on the Group's profitability. The combination of lower profit margins and increased sales and marketing expenses eventually resulted in a net loss being incurred in the Q4 FY2004.

The Company has just completed preparing its fourth quarter and full year financial statements, which will be reviewed by its Audit Committee. The full details of the Company's consolidated results will be finalised and is expected to be announced in the first week of February 2005.

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