On Monday, the group announced in a Bursa Malaysia filing it recorded a net loss of RM147.41 million for the third quarter ended Dec 31, 2022 (Q3 FY2023), marking its third consecutive quarterly loss for FY2023.
Net losses for the cumulative nine months widened to RM165.72 million, a sharp contrast to the net profit of RM17.74 million the preceding year.
The group took another blow to the chin after revealing its wholly-owned subsidiary, ATA Industrial (M) Sdn Bhd (AIM), was sued by Johnson Electric Industrial Manufactory Ltd (Johnson) to the tune of RM19.85 million (US$4.44 million).
“On Feb 28, 2023, AIM received a sealed copy of writ of summons and statement of claim dated Feb 24, 2023 filed by Johnson,” it said in a Bursa Malaysia filing yesterday.
The claim consists of payment for finished goods, raw materials, storage costs and testing fees.
The group said AIM is currently in discussion with the customer to evaluate whether the lawsuit is expected to have a significant impact on the operations on AIM and ATA IMS.
Investors vote with their feet
The bad news prompted investors to dump their shares over the past few days.
The day after posting its disappointing results, ATA IMS’ share price tanked 12.32% to 32 sen on Tuesday from 36 sen at Monday’s close.
Today’s announcement on the lawsuit saw its share price sink 11.33% to 27.4 sen at 4pm from 30 sen yesterday, valuing the company at RM328.8 million, marking the second sharp drop this week.
In its Bursa filing on Monday, the group said its net loss for Q3 jumped a staggering 4,715% from the preceding quarter, when ATA IMS posted a narrower loss of RM3 million.
“The decrease in revenue and profit before tax was mainly attributable to the termination of contracts by the major customer with ATA Industrial (M) Sdn Bhd,” the group said.
Another contributing cause was the impairment of assets and goodwill following the notice of termination of contracts by the major customer with Jabco Filter System Sdn Bhd and Winsheng Plastic Industry Sdn Bhd last December.
Dyson hammer blow
The major customer is likely to be British appliance maker Dyson, which had terminated various contracts with the manufacturer since 2021 due to allegations of forced labour and worker mistreatment. ATA IMS had produced numerous components for Dyson through its subsidiaries.
The loss of the contracts was a huge blow to the company, as sales of products to Dyson constituted 100% of Jabco’s revenue, and approximately 82% of Winsheng’s revenue.
Speculation that ATA IMS would be securing a new major customer led to a steep rise in its share price, surging 143.5% from a low of 19.5 sen on Jan 13 to a high of 47.5 sen on Feb 3.
The group’s financial results for the third quarter have largely erased much of the gains in its share price.
Nevertheless, ATA IMS has emphasised they are actively searching for a new buyer to replace Dyson.
“The company is actively engaging in business development to secure new customers and new business opportunities in response to the termination of contracts to ensure sustainability,” it added.