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Fabchem issues profit warning for 4QFY16

FABCHEM China is expected to post a net loss for 4Q2016, the group warned, due to challenging market conditions in China and the temporary suspension of its booster production activities.

The group has stopped production of its booster products following an unrelated explosion incident at a production plant in Shandong province in Q4 last year.

"As a precautionary measure, the authorities required all commercial explosives manufacturers in Shandong province to temporarily cease all production of commercial explosive products for safety inspections and clearance by the relevant authorities," it said.

While production for other products has since resumed, booster production requires additional safety inspection and clearance by the relevant authorities.

Its Q4FY16 performance was hampered by this development, since sale of boosters contribute significantly to revenue.

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It went on to add: "China continues to experience a slowdown in its economic growth and the broad-based weakness in global commodity prices continues to impact mining activities in China. In addition, as pollution and environmental issues remain key issues in China, the Chinese authorities have increased their scrutiny and regulations on industrial activities."

As most of its commercial explosives products are used in mining-related activities, this is having a knock-on effect on Fabchem China's local sales.

Its results will be released on or before May 30.

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