China Shoto plc
The Company is one of China's leading private companies engaged in the design development manufacture and sale of industrial batteries and power supply systems.
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China Shoto slides 10pct as it opts against dividend, despite 43pct profit increase
Shares in China Shoto (LON:CHNS) declined despite stronger sales and profits reported in the interim results released this morning, after the company opted against declaring an interim dividend in order to meet the financial demands of its lead acid recycling project.
China's largest manufacturer of back-up batteries posted revenues of £96.5 million for the first six months of the year, marking a 41 percent year on year increase, while profits surged 43 percent to £5.6 million, driving earnings per share to 23.37p, also a 43 percent year on year increase.
China Shoto said the growth was due to the overall improvement in Chinese economy as GDP (Gross Domestic Product) rose 7.1%, fuelled by the government's economic stimulus package of £375 billion, which led to significant investment in domestic infrastructure project, driving up the demand for Shoto's batteries.
The bulk of the revenues came from the sales of back-up batteries, which soared 82 percent year on year to £86.63 million. The company said it became the largest supplier to Chinese telecommunication companies China Unicom and China Telecom with the revenues from these sales set to be realised in the second half.
Gross margin for the period improved to 30.8 percent from 24.9 percent in H1 2008 due to lower lead prices and a greater share of sales of higher margin back up batteries. The Board also expects to achieve further cost savings with the completion of the planned lead acid battery recycling plant with an annual capacity of 100,000 tonnes. China Shoto decided against declaring an interim dividend, citing the need to meet the financial demands of the project, which it said would become the main driving force behind its revenue growth.
The company said the financial crisis resulted in an intensified competition in the domestic market, yet remained confident in further growth, looking to maintain it by re-appraising its client base and expanding the product range.
Despite stronger sales and profits, the results fell short of matching market expectations. Shares in China Shoto came under pressure following the release of the report, sliding over 10 percent.
