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Press Statement

by Lim Guan Eng

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(Petaling Jaya, Thursday): Proton should explain whether it has engaged in creative accounting by claiming after-tax profits of RM 3.5 million when it had actually made an operational loss of RM 49 million in the second quarter ended 30.9.2007. Proton had claimed improved sales and better cost management had contributed to its first profits after five consecutive quarters of net losses.

Such recovery by Proton in recording its first profits since early 2006 is deceptive when it is still making operational losses. These so-called profits in the second quarter included a write-back from previous year’s development cost amounting to RM 46 million and gain on land disposal of RM 6.6 million. Taking out these two extraordinary items out, Proton would have actually suffered a net loss of RM 49 million.

Proton had been desperate to offer good news since its share price plummeted to a 10 year low of RM 3.54 when it called off the potential strategic alliance with either Volkswagen or General Motors. Net profit after tax was RM 3.51 million against an after tax loss of RM 250.34 million previously and a lower pre-tax loss of RM 41.90 million in the first six months ended 30 September 2007 against a pre-tax loss of RM 336.02 million in the corresponding periods last year enabled Proton shares prices improve. However with poor export sales and a share of only one third of the domestic market as compared to two-thirds less than 10 years ago, the future prospects are dim and dismal.

For this reasons, Proton’s talk of introducing new models will not help, unless it captures a significant export market and establishes a partnership with an overseas manufacturer that will generate economies of scale. More importantly, Proton should practice generally acceptable accounting practices that does not hide its operational losses so as not to lose confidence with the investor public that it is resorting to desperate and dishonest practices to restore its financial credibility.