News Room - Business/Economics

Kinsteel Bhd has proposed a par value reduction of its paid-up share capital, cancelling 15 sen from each ordinary share’s par value of 20 sen, to reduce its accumulated losses and strengthen its financial footing.

In a filing with Bursa Malaysia, the loss-making maker of steel bars and related products said the reduction of its paid-up capital from RM209.87mil to RM52.47mil would give rise to a credit of RM157.4mil which would be used to set off against Kinsteel’s accumulated losses and/or in such manner as the board deemed fit and as permitted by the relevant and applicable laws.

Based on the unaudited financial statement for the quarter ended Sept 30, 2015, the proposed par value reduction would result in remaining accumulated losses of RM125.63mil at the company level and RM100.41mil at the group level as at Sept 30, 2015.

Kinsteel, whose auditor in November expressed doubts on its ability to stay in business, said the effective date for the proposed par value reduction would be the date of lodgement of the court order for the proposed par value reduction with the Companies Commission of Malaysia.
  

It noted that as at Jan 22, the closing price of its shares was 9 sen, a discount of 55% to the existing par value of the shares.

“The current market price of Kinsteel shares is therefore not conducive for Kinsteel to embark on any fund-raising exercise and/or corporate exercises involving issuance of new shares. Accordingly, the proposed par value reduction will also provide the company with greater flexibility to raise funds and to implement future corporate proposals which entail the issuance of new shares and equity-related instruments as and when the opportunity arises,” the company said.

Kinsteel shares closed unchanged at 8.5 sen on Tuesday with 149,000 shares being traded.

For the first quarter ended Sept 30, 2015, Kinsteel posted an after-tax loss of RM24.26mil, up from a loss of RM20.77mil a year earlier, on 29.3% lower revenue of RM54.5mil.

In November last year, Crowe Horwarth, the auditor of Kinsteel Bhd and its 31%-owned associate Perwaja Holdings Bhd, expressed doubts about the group’s ability to remain in business, as the two steelmakers struggled with deepening losses and mounting debts.

Crowe Horwarth noted that apart from the net losses of RM93mil and RM148mil at group and company levels respectively as of June 30, 2015, the group’s and company’s current liabilities also exceeded current assets by RM646mil and RM430mil respectively.

This indicated a material uncertainty existed that might cast significant doubt on the group’s and company’s ability to continue as going concerns, the accounting firm said.