Asia Pacific Wire & Cable Corporation Limited — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB; amounts below are US$ unless stated otherwise.
Business context
APWC is a Bermuda holding company with operating subsidiaries across Thailand, North Asia and the Rest of the World (ROW), principally manufacturing and distributing enameled wire, power cable and telecommunications products, and providing supply, delivery and installation (SDI) services. PEWC controlled approximately 80.96% of APWC at year-end.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $433.9 million | $476.7 million |
| Gross profit / margin | $32.5 million / 7.5% | $21.2 million / 4.4% |
| Operating profit (loss) | $8.1 million | $(5.0) million |
| Profit (loss) for the year | $4.8 million | $(8.5) million |
| Profit (loss) attributable to APWC shareholders | $3.9 million | $(2.6) million |
| Basic and diluted EPS | $0.19 | $(0.19) |
| Cash provided by (used in) operating activities | $6.6 million | $(41.6) million |
| Cash and cash equivalents | $54.0 million | $44.5 million |
| Working capital | $165.9 million | $149.8 million |
| Interest-bearing debt | $57.7 million | $65.4 million |
| Total assets / total liabilities | $371.0 million / $159.6 million | $389.4 million / $180.1 million |
| Capital expenditures | $3.7 million | $8.5 million |
Gross margin was approximately 7.5%, versus 4.4% in 2021. Cash flow from operations improved by $48.2 million year over year. Reported net debt, including trade and other payables less cash, was $43.6 million; the company’s gearing ratio declined to 17.1% from 23.9%.
Material changes versus FY2021
- Revenue fell 9.0%. North Asia revenue declined 28% to $77.3 million, Thailand declined 13% to $171.8 million, and ROW increased 7% to $184.7 million.
- APWC returned to operating and net profitability. The improvement included a $4.6 million swing in foreign exchange results, from a $4.4 million loss to a $0.1 million gain.
- Thailand moved from a $13.5 million segment operating loss to $2.6 million operating profit; North Asia segment operating profit fell to $0.2 million from $4.5 million, while ROW operating profit rose to $7.8 million from $6.7 million.
- Finance costs increased to $1.65 million from $1.25 million despite lower debt, primarily due to higher interest rates. The average LME copper price declined 5.4% to $8,814 per metric ton.
- Onerous-contract provisions fell to $2.1 million from $9.6 million, following $7.8 million of reversals in 2022. Inventory impairment was also reversed by $1.1 million in 2022, compared with a $14.1 million inventory charge in 2021.
Liquidity, outlook and other notable items
- At year-end, available credit facilities totaled approximately $254.9 million, with about $162.1 million unused, including the effects of letters of credit. The company said cash, operating cash flow and available facilities should cover requirements for at least the next 12 months. Most cash was held at subsidiaries; APWC itself held $5.4 million.
- Contractual undiscounted obligations included $61.0 million of borrowing payments, $2.9 million of lease payments, $224.7 million of raw-material purchase obligations and $0.7 million of capital commitments. The filing reports $46.1 million of borrowing payments due in less than one year.
- Management estimated 2023 capital expenditures of $0.7 million, subject to market conditions, funded from operations, and anticipated equipment purchases to expand capacity in Australia and Thailand. A Taiwan alternative-energy business remains at the development stage and has generated no material revenue; APWC injected $3.9 million into APNEC in December 2022.
- APWC had not declared or paid shareholder dividends since 2019 and did not anticipate paying one in 2023. Separately, Charoong Thai declared a $0.6 million subsidiary dividend in February 2023, subject to shareholder approval and scheduled for payment in May.
- Risks highlighted include copper-price and input-cost volatility, concentrated customers and end markets, foreign-exchange exposure, COVID-19 and supply-chain disruptions, competition (including state-owned enterprises), debt covenants, and political, regulatory and currency-transfer risks in operating markets. One ROW customer generated 15.4% of 2022 revenue; one customer represented 14.4% of year-end trade receivables.
- The auditor issued an unqualified opinion on the IFRS financial statements. Its critical audit matter was estimating progress and expected costs for SDI contracts; SDI revenue was $44.7 million in 2022. Management assessed disclosure controls and internal control over financial reporting as effective; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Confirm the sustainability of the return to profit, particularly whether margin recovery depends on copper-price movements, inventory recoveries and onerous-contract reversals.
- Review the cash-flow and working-capital drivers, including the rise in days sales outstanding to 78 from 71 and the location and transferability of subsidiary-held cash.
- Assess the scale, expected margins and customer concentration of SDI contracts, including management’s cost-to-complete estimates and the $109.8 million of unsatisfied SDI contract value expected to be recognized over three years.
- Verify near-term borrowing maturities, facility renewal terms, covenant headroom, guarantees and collateral, and the effect of higher interest rates.
- Consider PEWC’s 80.96% ownership, related-party transactions and influence over governance, as well as the limited public float and dividend outlook.
- Reconcile share-count disclosures: 20,616,227 shares were reported outstanding at year-end, while 20,627,327 were issued, including 11,100 treasury shares. Also review the rights offering’s approximately $8.3 million gross and $7.9 million net proceeds.