The Board of Directors of China Essence Group Ltd (the “Company”, or together with its subsidiaries, the “Group”) wishes to announce that the Group expects to register a net loss for FY2013. The Group expects an adverse impact on profit margin for the year as the operating environment remained challenging for the potato starch industry in People’s Republic of China (“PRC”).
In its second quarter for the financial year ending 31 March 2012 (“2Q FY2012”) results announcement dated 8 November 2011, the Group reported that the price of potatoes fell sharply in the second half of September 2011 due to a supply glut, causing the market price of potato starch to follow suit. Despite a moderate increase in potato prices since 2Q FY2012, the price of potato starch remained disproportionately low. This continued to cause a squeeze on the Group’s profit margin for FY2013.
In addition, the severe weather in the Northeast of China has affected the Group’s potato stock. As a result of the unexpectedly cold climate last winter season, the Group’s potato stock yielded a lesser amount of starch. Besides, some of the potato stock was damaged by the same reason and no longer suitable for further process, the Group sold all these damaged potato at scrap price. This has added further pressure on the Group’s profit margin for FY2013.
The profit warning is based on a preliminary review of the unaudited financial results of the Group. Further details of the Group’s performance will be made available when it announces its FY2013 full year financial results on 28 May 2013 after market closes.
