SINGAPORE (Mar 7): Sunningdale Tech says that the group’s latest manufacturing sites in Chuzhou and Penang are part of its long-term strategy to build a sustainable and profitable business model.

Khoo Boo Hor, executive director and CEO of Sunningdale, says, “Whilst the board does not ignore the share price movement, we believe that our unwavering focus on the fundamentals of our businesses will bring more enduring long-term value accretion to our shareholders.”

The high-precision plastic components maker was responding to the open letter by activist fund Quarz Capital Management to Sunningdale's board, urging it to quantify the total gross and operating loss in Penang, as well as the cost of inefficiencies in maintaining duplicate operations and shifting between Shanghai to Chuzhou.

Quarz believes the disclosures would give shareholders greater clarity and forecast on long term profitability and the intrinsic value of Sunningdale's business.

See: Quarz presses Sunningdale to address 'shareholder value destruction', quantify Penang losses

In its reply, Sunningdale says although the costs of shifting manufacturing from Shanghai to Chuzhou, as well as the initial startup phase in Penang caused a drag on near-term financial performance, the group expects completion of the shift on operations in China to take place by 3Q19 and for utilisation levels in Penang to improve in 1H19.

The group also experienced cost pressures from rising labour and utility costs, price pressure from customers and negative sentiment surrounding the US-China trade war and was further impacted by a slowing automotive market as global automotive sales declined in key markets such as the US, China and Europe towards the end of 2018.

To mitigate these challenges, the board says in FY19, the group will focus on tightening cost controls, boosting productivity and enhancing operational efficiency. It will also closely monitor the automotive market and aggressively pursue business development initiatives to secure new projects.

The board remains confident on the group’s long-term sustainability and profitability and has increased dividends paid each year since FY12, despite not having a formal dividend policy. The board will also continue to explore all options that may unlock value for shareholders as the group executes various growth strategies aimed at enhancing long-term shareholder value.

Shares in Sunningdale closed 4.41% higher on Wednesday at $1.42.