KUALA LUMPUR: Eng Teknologi Bhd sank into the red for 4QFY11 ended Dec 31 and only expects pre-flood capacity to return in 3QFY12.

The hard disk drive (HDD) parts manufacturer posted a net loss of RM53 million for 4QFY11 compared to a net profit of RM9.3 million a year earlier as its operations in Thailand were affected by floods during the quarter. The loss was also due to impairment and write-off of property, plant and equipment and writedown of inventories of RM45.8 million as a result of the floods.

“[The group’s] operations in Thailand, China and Malaysia have been badly impacted since the floods inundated much of Thailand’s HDD industry. The reason the China and Malaysia operations were impacted as well is because a significant portion of their revenue derived from sales to customers located in Thailand,” it said in its filing with Bursa Malaysia.  

Revenue for 4Q fell 49.5% to RM68.9 million from RM136.5 million. It posted a basic loss per share of 44.2 sen compared to basic earnings per share of 7.7 sen a year earlier. Excluding the writedown and impairment, Engtek would have incurred a net loss of RM5.2 million in 4Q due to lower revenue.

For the full year, Engtek posted a net loss of RM42.9 million compared to a net profit of RM48.3 million a year earlier. Revenue fell 17.4% to RM460.4 million from RM557.3 million due to the Thailand floods and resulting impairment and writedown.

Engtek said the insurance claims are expected to be paid in the second half of 2012. “Insurance claims have been submitted and loss adjusters surveys are expected to complete by end-February 2012,” it said.

Engtek said the group has redirected certain capacities to Malaysia and the Philippines while the Thai operations are being rebuilt. “The alternative capacities are gradually commencing operations and are ready to supply fresh parts in 1QFY12. The Thailand plants are expected to restart operations in 3Q12,” it said.

The group noted the landscape of the HDD industry has changed drastically as its major customers were hit hard by the floods.

“The floods have caused worldwide shortages in hard disk drives and prices have been adjusted upwards. While this is positive and assist in the rebuilding of lost capacities, the group’s sales volume is hindered by loss of capital equipment and lower demand from its direct customers for the time being,” it said.

Engtek said it would focus on maximising insurance claims and rebuilding lost capacities as quickly as possible to avoid losing its customers to competitors.

“Once recovery is achieved, the group should be profitable once again. It is expected that the group will resume pre-flood capacities in 3Q12,” it said.

Engtek closed unchanged at RM1.73 yesterday with 389,700 shares traded.

This article appeared in The Edge Financial Daily, February 22, 2012.