Creative 4Q FY11 Net Loss US$19.7million ~ Creative Labs Zen MP3 Players Sound Blaster Card
Creative Labs Sale!
creative labs sale!
'Like' us to get latest Discount Coupons update and win prizes!->

Friday, August 5, 2011

Creative 4Q FY11 Net Loss US$19.7million



Creative is still bleeding from loss because of restructuring exercise. Creative will be targeting to return to profitability by the end of this calendar year. But with the challenging overall market for it’s products, Creative expects to report an operating loss for the next quarter.

Net SalesNet sales for the fourth quarter of FY2011 decreased by 20% compared to the same quarter in FY2010, and net sales for FY2011 decreased by 16% compared to FY2010. Revenue was lower in the fourth quarter and FY2011 as the Group continues to be affected by the difficult market for its products, particularly for the personal digital entertainment products. The decrease in sales in FY2011 is across all three geographical regions at 13%, 25% and 15% in Asia Pacific, the Americas and Europe region, respectively.

Gross Profit
Gross profit margin was 7% in the fourth quarter of FY2011 compared to 24% in the fourth quarter of FY2010. Gross profit margin was lower in the fourth quarter of FY2011 due primarily to restructuring charges of US$4.2 million included in cost of goods sold as a result of the Group’s restructuring exercise undertaken during the quarter (see below). The restructuring charges comprised mainly employee severance costs, inventory write-downs and other charges relating to discontinuance of certain businesses. Excluding the effect of restructuring charges, gross profit margin in the fourth quarter of FY2011 was 16% compared to 24% in the fourth quarter of FY2010, due mainly to write-down of inventory pertaining to product transition for certain personal digital entertainment products, offset partially by lower depreciation charges due to equipment that were fully depreciated in the fourth quarter of FY2010.

Gross profit margin was 21% in FY2011 or 23% before restructuring charges, compared to 25% in FY2010.

Net Loss
Net loss for the fourth quarter of FY2011 was US$19.7 million compared to US$11.3 million in the fourth quarter of FY2010. As disclosed in the announcement of results for the third quarter ended 31 March 2011, the Group undertook a restructuring exercise in the fourth quarter of FY2011 including worldwide headcount reductions as well as streamlining of certain businesses and product categories. The total restructuring charges were US$10.4 million of which US$4.2 million was charged to cost of good sold, US$2.2 million to selling, general and administrative expenses and US$4.0 million to research and development expenses. Excluding the effect of restructuring charges, net loss for the fourth quarter of FY2011 was US$9.3 million. Net loss for FY2011 was US$47.1 million, or US$36.7 million before restructuring charges, compared to US$38.4 million in FY2010.

Selling, general and administrative expenses in the fourth quarter of FY2011 increased by 11% compared to the fourth quarter of FY2010. The increase was due mainly to employee severance costs of $2.2 million pertaining to the restructuring exercise. Excluding the effect of restructuring charges, selling, general and administrative expenses in the fourth quarter of FY2011 decreased by 5% compared to the fourth quarter of FY2010. For the full year ended 30 June 2011, selling, general and administrative expenses increased by 3% compared to FY2010. Excluding the effect of restructuring charges, selling, general and administrative expenses for FY2011 decreased marginally by 1% compared to FY2010.

Research and development expenses in the fourth quarter of FY2011 increased by 6% compared to the fourth quarter of FY2010. Research and development expenses in the fourth quarter of FY2011 included restructuring charges of $4.0 million comprising mainly employee severance costs. Excluding the effect of restructuring charges, research and development expenses in the fourth quarter of FY2011 decreased by 19% due mainly to reduction in payroll costs and engineering service expenditures. For the full year ended 30 June 2011, research and development expenses increased by 13%, or 6% before restructuring charges, compared to FY2010. Going forward, the Group will continue to invest in product research and development in areas that are strategic to the Group, cutting back on research and development spending only in product areas that are not strategic to the Group.

Other gains of US$5.1 million in the fourth quarter of FY2011 were due mainly to foreign exchange gains of US$5.2 million. Other gains of US$27.5 million in FY2011 were due mainly to exchange gains of US$25.3 million and gains on disposal of investments US$2.6 million. In the fourth quarter of FY2011, the Company has disposed its equity interest in a wholly-owned subsidiary in China, Creative Technology (Qingdao) Ltd (“CQD”). CQD owns a 287,000 square feet factory in Qingdao and it performs manufacturing operations for the Group. This transaction is in line with the strategic direction the Group has undertaken to dispose and streamline its manufacturing operations. The sales proceed was US$9.1 million and the gain on disposal was US$0.1 million.

Other losses of US$2.3 million in the fourth quarter of FY2010 were due mainly to US$6.4 million of foreign exchange losses offset by a US$4.8 million gain on disposal of investment in an associated company. Other gains of US$3.4 million in FY2010 comprised a US$9.7 million gain on disposal of investments in associated companies, a US$1.9 million government grant to a subsidiary company offset by foreign exchange losses of US$8.2 million.

Income tax credit of US$4.8 million in FY2011 were due mainly to a US$3.3 million write back of deferred tax liability and a US$2.0 million write back of tax provision. Deferred tax liability of US$3.0 million was previously provided for the tax exposure of a subsidiary company. The amount was written back in the fourth quarter of FY2011 as the Group had disposed the subsidiary company in FY2011 and is no longer liable to its tax exposure. Tax provision of US$2.0 million pertaining to open years of assessment were finalized and written back by the Company in the fourth quarter of FY2011.

Income tax credit of US$8.3 million in FY2010 was due mainly to a US$8.3 million write back of deferred tax liability.

Deferred tax liability of US$6.3 million was written back in the fourth quarter of FY2010 due to the expiration of the Company’s pioneer status in March 2010 where pioneer losses brought forward from the previous financial years can be used to offset certain tax liabilities. Deferred tax liability of US$2.0 million was written back in the second quarter of FY2010 pertaining to offshore interest income remitted to Singapore which was not taxable due to a tax concession granted by the Singapore tax authorities.

PROSPECTS
For the current financial year, there is higher uncertainty in the global economic environment and the overall market for the Group’s products remains challenging. For the current quarter, operating expenses are expected to be lower as a result of the restructuring exercise. However, with the challenging overall market for the Group’s products, the Group expects to report an operating loss. The Group will continue to take steps to reduce operating expenses to bring them in line with the Group’s revenue and gross margins, targeting to return to profitability by the end of this calendar year.

We want to hear from you, please feel free to let us know in the comments section below.

2 comments:

Anonymous said...

Kudos to CEO&Team for showing the world how to run a company for years with out a dime as profit.

Jimmyboy88 said...

yea its eating into their reserves. hope they find a solution fast

Post a Comment

Need more help? Please post your questions/comments in myCreative Fansite Forum. So that we can help you out.

myCreative Fansite Store (fulfilled by Amazon!)
Store | Buy @ US | Buy @ UK

Zen Forums
MP3 Player | ZEN Tips, Tricks, Hacks | ZEN X-Fi Style / 100 / 300 | ZEN X-Fi2 | ZEN X-Fi | ZEN Mozaic / EZ100 / EZ300 | ZEN / MX | ZEN V / Plus | ZEN Vision M | ZEN Vision W | ZEN Micro / Photo | ZEN Stone / Plus | MuVo / T100 / T200 | Nomad Jukebox Zen Xtra / MuVo | Zii Egg | ZEN Touch 2 ZEN Style M100 / M300

Tablet Forums
ZiiO Tablet

Other MP3 Player Forums
Microsoft Zune / HD | SanDisk Sansa

Sound Blaster Forums
Sound Blaster Card | Audigy

Creative Forums
Creative Technology | Auction Buy Sell | Vado HD / Webcam | Creative Speaker Creative Headphone Headset

Other Forums
Our Site News, Announcement | Chit Chat | Counseling Psychology

Popular Posts



Recent Posts



Recent Comments