Business context and reporting period
Asia Pacific Wire & Cable Corporation Limited (APWC) filed this Form 20-F for the fiscal year ended December 31, 2020; it is an annual report, not a standalone 2020 Q4 filing. APWC manufactures and distributes power, telecommunications and enameled-wire products, and provides cable project services, through operations in Thailand, China, Singapore and Australia. Financial statements are prepared under IFRS as issued by the IASB; amounts below are U.S. dollars.
Key financial metrics
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Revenue | $313.6 million | $338.2 million |
| Gross profit / gross margin | $33.9 million / 10.8% | $24.8 million / 7.33% |
| Operating profit (loss) | $7.6 million | $(0.6) million |
| Profit (loss) for the year | $3.7 million | $(1.0) million |
| Attributable to APWC shareholders | $(0.6) million | $(1.6) million |
| Basic and diluted EPS | $(0.04) | $(0.12) |
| Net cash from operating activities | $16.4 million | $15.1 million |
| Cash and cash equivalents at year-end | $52.2 million | $53.7 million |
| Working capital | $180.3 million | $185.9 million |
| Interest-bearing borrowings | $13.8 million | $11.4 million |
FY 2020 cash used in investing activities was $20.3 million, including $14.5 million of cash purchases of property, plant and equipment. Financing activities provided $2.1 million; cash decreased by $1.4 million overall. Total assets were $338.1 million and total equity was $234.9 million at year-end. The filing’s stated 2020 gearing ratio was 0.0%, reflecting net cash under its calculation of borrowings plus trade and other payables less cash.
Available bank facilities totaled approximately $264.2 million, with approximately $200.3 million unused at year-end, including the effect of letters of credit. Facilities are at subsidiary level and reviewed annually. Of year-end cash, $4.3 million was held at APWC; the remainder was held by subsidiaries. The company reported DSO of 91 days, versus 83 days in 2019.
Material changes versus the prior comparable period
- Revenue fell 7.3%. Thailand revenue declined 16.7%, mainly from lower sales of low-margin products; North Asia revenue fell 4.4%, primarily following Shanghai Yayang’s 2019 manufacturing shutdown. ROW revenue rose 8.4%, which management attributed primarily to reduced competition associated with COVID-19.
- Gross profit increased 36.7% and gross margin rose to 10.8% from 7.33%, mainly due to a shift toward higher-margin sales.
- Operating results improved by $8.2 million, from a loss to profit. North Asia and Thailand segment operating margins improved to 4.22% and 7.83%, respectively. ROW’s operating loss margin worsened to 4.64% from 1.86%, attributed to COVID-19-related factors and copper-price fluctuations.
- Net profit included a $579,000 foreign-exchange loss, compared with a $1.55 million gain in 2019. Income tax expense increased to $4.0 million from $2.1 million, mainly with higher taxable income.
- Operating cash flow rose modestly, while capital spending increased substantially from $5.4 million in 2019 to $14.5 million in 2020. Total borrowings increased from $11.4 million to $13.8 million.
Outlook, risks, contingencies and unusual items
- Management said cash, operating cash generation and available credit facilities should cover requirements for at least the next 12 months. It gave no specific revenue or earnings guidance. Planned 2021 capital expenditures were approximately $2.5 million, subject to market conditions, for equipment and factory projects in China and Thailand; management expected to fund them from operations.
- COVID-19 disrupted production, suppliers and customer activity, delayed contract fulfillment, pressured Singapore operations and cash conversion, and contributed to asset impairment risk. China production had recovered from first-half restrictions, but management warned of possible renewed disruption. FY 2020 included $202,000 of property, plant and equipment impairment and $882,000 of COVID-19-related government grants.
- Copper represented approximately 83% of product cost in 2020. Copper-price volatility may affect inventory values, margins and contract economics. Onerous-contract provisions rose to $5.1 million from $238,000. The filing reports an additional Q1 2021 unrealized copper-related loss of $4.6 million in the subsequent-events note, but elsewhere refers to $2.8 million; the amount is inconsistent within the filing and should be verified.
- A $6 million related-party loan from majority shareholder PEWC carries 3% interest, is secured by APWC’s 98.3% stake in Sigma Cable and was scheduled to mature July 10, 2021. The filing states that it remained outstanding at year-end.
- APWC paid no dividend in 2019 or 2020. The board cited funding needs and business performance. As a holding company, APWC depends on subsidiary distributions, which may be restricted.
- APWC transferred its Nasdaq listing from the Global Market to the Capital Market in July 2020 after failing the Global Market minimum public-share value requirement. The filing also warns of possible U.S. trading restrictions under the Holding Foreign Companies Accountable Act because the auditor’s PRC affiliate was not subject to PCAOB inspection.
- Other material risks include customer concentration, intense competition, foreign-exchange exposure, political and regulatory uncertainty in operating markets, and limited insurance coverage. The largest customer accounted for 14.76% of trade receivables at year-end; one Thailand-region customer generated 10.68% of 2020 revenue. APWC is controlled by PEWC, which owns approximately 75.5% of its shares.
- Raw-material purchase commitments totaled $251.0 million; capital commitments were $2.5 million. APWC guaranteed up to $25.1 million of Sigma Cable obligations, and banks had issued $17.0 million of performance guarantees for Charoong Thai and subsidiaries. No material legal proceedings were reported.
Most important facts for investors to verify
- Reconcile the conflicting Q1 2021 copper-related loss disclosures of $2.8 million and $4.6 million, and assess the exposure from the $5.1 million onerous-contract provision.
- Confirm repayment or refinancing of the $6 million PEWC loan due July 2021 and review its Sigma Cable share pledge and other debt maturities and covenants.
- Assess the quality and collection timing of receivables, given 91-day DSO, COVID-related contract delays, and customer concentration.
- Validate that available facilities remain renewable and accessible, and evaluate how much cash is operationally available to APWC given that most cash is held by subsidiaries.
- Monitor Nasdaq listing compliance and auditor-inspection developments under the HFCAA, alongside the company’s majority-shareholder and related-party risks.