LONDON (Alliance News) - China New Energy Ltd Thursday said its loss swelled significantly in 2015 after costs rose and it booked provisions against the court case it lost, and then subsequently appealed, last year.
China New Energy shares were down over 29% to 1.59 pence per share on Thursday.
The company, which provides engineering services and technology to the bioenergy sector, said its pretax loss ballooned to CNY26.4 million from the CNY8.5 million loss in 2014 as a provision booked against an ongoing legal case offset a rise in revenue.
Revenue increased CNY61.7 million from CNY57.3 million to push the gross profit up to CNY7.7 million from CNY4.3 million. The majority of the revenue was derived by providing maintenance services to existing clients.
However, China New Energy booked a CNY6.5 million provision in relation to a court case in between Shenzhen Baixie Investment Group and the company's operating subsidiary, and the charge has been booked based on the notice of enforcement, which is in favour in Baixie, including penalty of CNY1.5 million.
The dispute is over the quality of a project delivered by China New Energy, and although it lost the case last year, it has appealed. The second trail started in March but the court hearing has not yet taken place.
Importantly, China New energy had cash of CNY19.4 million at the end of the period, but CNY8.1 million has been frozen in relation to that court case. At the end of 2014, cash stood at CNY14.9 million.
Research, development, selling and distribution costs were also higher year-on-year.
"Despite the low oil price and, consequently, the lower level of investment in the biofuel industry during the year under review, I am pleased that we have increased our revenue and have won contracts and opportunities to expand into new regions," said Chairman Weijun Yu.
China New Energy is not involved in the oil market, but its developments of biofuel projects is at its best when biofuel is competitive with petrol prices, meaning lower oil prices strain the attractiveness of the company's offering and leads to projects being delayed.
"To mitigate this, the management have focussed on three areas; maintenance and efficiency of existing projects, diversification into other technologies, and development of projects where there are intangible benefits such as reduced carbon dioxide emissions or job creation as is the case with the pipeline of projects in sub-Saharan Africa," said the company.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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