Shares & Derivatives
Ferro Trouble
By Bully The Bear  •  October 11, 2008
By: La Papillion Ferrochina announced very grimly news. Due to the current economic crisis, they are unable to repay part of its working capital loans amounting to about RMB 706 mil, which had become due and payable. As a result, further loan facilities and notes of about RMB 2,030 mil may potentially become due and payable. Another sum of working capital loans of RMB 2,493 mil may also become due and payable. Ferro china is thus currently in active negotiations with its financial lenders to explore various options (including refinancing) to address its repayment obligations. If unsuccessful, they will not have sufficient cash to satisfy its financial obligations. In view of the liquidity issues which Ferro is facing, the Company has temporarily ceased its manufacturing operations in its factories located in Changshu City, Jiangsu, PRC and Changshu Riverside Industrial Park, Jiangsu, PRC. Shares are suspended till further notice. I wanted to see if I can spot anything before this news came out. I browsed through their 2HFY08 results: ------------------------------------2H08-------------2H07 Current ratio---------------------1.02--------------0.95 Quick ratio-----------------------0.64--------------0.62 Total debt/equity----------------130%------------106% '000,000 RMB Cash flow from operation----------385--------------(-137) Cash flow from investing----------(949)-------------(478) Cash flow from finance-------------710--------------676 Cash at end of period---------------125-------------0.757 Gross margins---------------------9.1%-------------9.5% Net margins-----------------------6.4%-------------6.9% Diluted EPS (RMB cts)-----------50.52------------35.12 ROE (half yr)----------------------6.3%-------------2.3% Asset turnover--------------------0.43--------------0.16 Financial leverage------------------2.3---------------2.1 Net margins(%)--------------------6.4%-------------6.9% With the benefit of hindsight, I can see that the total debt/equity is increasing drastically from one year ago. This is due to their higher borrowings. Quick ratio is not very good, being less than 1. Thought there is an improvement, the absolute value are not good. Do not always look at the trend, the figures itself matters as much. Read more..
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By Bully The Bear
La papillion is french for butterfly. This blog chronicles my journey from an amateur in the stock market to where I am today. Have I turned into a beautiful butterfly? I don't know, but I think my metamorphosis is still on-going now :)

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