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Highlights for GP Batteries’ Challenging Financial Year

GP Batteries International (SGX: G08) is a consumer battery designer and manufacturer with manufacturing facilities in Singapore, Malaysia, Hong Kong, Taiwan, and China. It manufactures batteries for other major brands as an original equipment manufacturer (OEM) and also sells its own “GP” branded batteries. It’s a rather unique company listed in Singapore as there aren’t too many battery makers around.

Interestingly enough, in the consumer battery market that’s dominated by Energizer Holdings (NYSE: ENR), GP Batteries claims to be the largest consumer battery manufacturer in China,

In any case, GP Batteries had recently issued a profit warning for its financial year ended 31 March 2014 (FY2014). In it, the company cautioned that it would be making losses for the year. With the company handing its full-year report card just yesterday, let’s take a look at how it actually fared.

Operating results

For FY2014, GP Batteries saw its revenue decline by 3.6% to S$695.4 million compared to a year ago.

However, as its cost of sales dropped by a higher percentage at 5.5%, the company’s gross profit actually grew 3.7% to S$156.2 million.

But just as the company had warned, GP Batteries’ bottom-line worsened as its loss widened from S$16.2 million a year ago to S$52 million. The main culprit was an impairment of the company’s investments in the Vectrix Group, which had worked on GP Batteries’ electric vehicles project. In addition, a write down of GP Batteries’ rechargeable Lithium battery plant in Taiwan added to the company’s troubles.

All told, GP Batteries would actually have earned a pre-tax profit of S$20 million for FY2014 before the impairments on Vectrix and the Lithium plant were accounted for.

Another important event for the company in FY2014 was its rights issue in March 2014 which saw its share count increase by 50%. Due to the rights issue, the company ended the year with a stronger balance sheet with its net debt (total debt minus total cash) to equity ratio dropping from 39% a year ago to 18.7%.

What’s next for GP Batteries?

The company has failed in its electric vehicles project (the Vectrix Group investment) and has since discontinued the venture. It has also consolidated its lithium batteries business and commented that the nickel metal hydride battery industry is no longer growing and has become filled with competition. It seems that the company will still continue to face many challenges ahead, though the positive changes it has made – the consolidation of its lithium battery operations and the re-focus on batteries, for instance – has allowed it to be  “better placed to return to growth and profitability.”

Foolish Summary

GP Batteries is currently trading at S$0.56 each, giving its shares a price to book value of just 0.4. For FY2014, despite the severe losses, the company still announced an annual dividend of S$0.01 per share. In comparison, FY2013 saw the company paying out S$0.02 per share in dividends.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.