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China Fibretech remains suspended, to engage lawyers to handle damage claims
CHINA Fibretech, whose shares remain suspended from trading since Nov 30, 2015, said on Friday it will engage a law firm to handle the 466 million yuan (S$94.6 million) damage claims made by its customers.
The S-chip was replying to queries by Singapore Exchange (SGX) over the discrepancies between the 64.3 million yuan revenue generated in FY2015 and claims amounting to 466 million yuan.
"Therefore, the sales recorded in our books are processing fee only," Wu Xinhua, executive chairman and CEO of China Fibretech, said. "The alleged claims amount is based on the costs of the claimants' end-products."
Trading in the company's shares had been suspended after its subsidiary, Shishi Simwa Knitting & Dyeing Co, received the damage claims from three customers in 2015 for products delivered in 2014 and early 2015.
The customers claimed to have suffered "substantial damages and financial losses" as a result of Shishi's products not meeting their specified requirements, causing decolourisation of their end-products.
In reply to SGX's query over why three unrelated customers made the claims on the same day, China Fibretech said two of the companies had been commissioned by another to process its apparels.
Since the claims were made, the company's representatives had visited the claimant's factories to inspect the products, and samples were extracted and sent to independent third parties for testing in March this year. These samples failed to meet the required standard.
On SGX's concerns over how the company's cash is safeguarded, China Fibretech said: "There is no indication that the company's cash is at risk at this point in time. Due to the uncertainty of the claims' outcome, the company will not make any payments in relation to the claims at this point in time."
China Fibretech said due to the uncertainties surrounding these claims, trading of its shares would be suspended until further notice to ensure a fair, orderly and transparent market.
SGX had previously warned investors in its Regulator's Column about China-based companies including those from the textile and sporting goods business, that were announcing adverse and significant changes in their financial positions, and where bank balances were duly affected.