Dear shareholders.

I am Skykim, CFO of Finetex.

There were so many concerns and questions from many shareholders after public announcement of 1Q financial report. So I think it’s necessary to explain the 1Q results.

I apologize these late explanations.

Finetex reported W3.43bn worth of net loss, which is largely a combination of W0.2bn of operating loss, W0.8bn of interest expense and W2.34bn of FX evaluation losses. 

The FX evaluation loss came from KRW appreciation against USD as much as 92.4 won during the quarter for the loans to our subsidiaries in Canada and Philippine. 

In accordance with K-IFRS, the parent company (Finetex) should report this evaluation gain/loss in its consolidates income statement while the subsidiaries will book the same amount as direct adjustment to equity(Other comprehensive income). 

Thus, W2.34bn of FX loss does not related to any fundamentals or cash flow. 

Even though Finetex posted the largest quarterly sales from nano division(18% YoY), total sales declined by 7.7% due to plummeted sales of renewable business division. As such, total operating profit turned to loss(-W0.2bn) largely because of fixed cost effect from shrunk sales of renewable energy biz.

 

For renewable energy business, the reason for the sharp decrease in sales(-44% YoY) came from weaker-than-expected order backlog in 2016 reflecting anemic construction industry in Korea(except for housing sector).

Also the delayed progress of the existing project also contributed to the weak revenue in energy division.

However, we think the energy division will recover to the normal level from 2Q 2017.

Also, nano fiber division, we think, will continue to show a meaningful 30% YoY growth for years to come. 

As local press already highlighted, we recently ramped up our facilities for filter products and nano membrane to cope with the rising demand from our global clients. 

We are highly committed to deliver substantial business results for our shareholders. 

Starting from 2Q 2017, we will publish our IR fact book through our website, which will contain specific business results and outlook.

Thank you. 

CFO / Executive managing director.

Sky Kim