Cost Saving Strategy

Hi Guys

With reference to my post yesterday regarding dropping Gross Margin, I contacted the company and was informed that the selling price did not change for the last 2 years (with exception to the new 2*2 patch which is sold much cheaper than others due to lower production cost). The reason why the margin dropped was "potentially" due to the fact that they change the way they allocate the cost.

Anyway, I suspected that they changed the way they allocate cost in 2nd half last financial year. If you guys looked at the annual report Page 18 income statement, the annual gross profit is only 3.058 million. But the half year report last FY showed that the half year gross profit is already 1.9 million. That did not make any sense. How can you sell more in second half but your gross margin dropped from 1.9 to 1.1 million? The only answer is that they changed the way they allocate cost.

I also asked the cost saving strategy ongoing forwards and I want answers in details.

That's what I got.

1. Reduction of Board Size (at least we know this is not BS answer)
2. re-structure of sales team to get rid of less effective sales person
3. improved efficiencies in manufacturing and facility management.
4. Reduction of external assistance (e.g. consulting and legal costs)

I am still not happy with the answers because we do hear unreliable things from JC. So today I will try to email the new Chairman to get an answer.

Let's pray!