Starch manufacturer China Essence Group clarifies financial position

China Essence provided the following update on its financial position, no doubt in part in response to last week's drop in stock price:

It has come to the management’s attention that there were concerns regarding the debt level of the Group. The management would like to take this opportunity to inform the market about the Group’s current situation.

China Essence’s cash position as at end 31 March 2010 ("FY2010") stood at RMB432.4 million and trade receivables were RMB287.4 million. Historically, the Company has never experienced bad debts nor had to make provisions for doubtful debts. Collection of receivables has always been within the credit terms of 60 to 120 days provided to its customers. In addition to being in negotiations with current creditors, namely DBS Bank, Agricultural Bank of China, Bank of Communications and Morgan Stanley, the Company is also exploring various options to mitigate any risk of not being able to meet its debt obligations and working capital requirements, including but not limited to bank financing from offshore and onshore entities.