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Pos Malaysia’s net profit eroded by 93% to RM1.6mil for the first quarter ended March 31 mainly due to impairment losses stemming from its investment in the financially-troubled Transmile Group Bhd.

Its mark-to-market losses from its investment in Transmile amounted to RM19.4mil in the quarter.

To recap, Transmile’s troubles started following an accounting scandal in mid-2007 that resulted in a massive drop in the company’s share price to a low of 39.5 sen on March 31, the mark-to-market cut-off date for this quarter.

Pos Malaysia holds a 15% stake in Transmile and had made a total provision of RM257mil for the last two financial years mainly to reflect the dimunition in value of its stake in Transmile.

However, at the operating level, Pos Malaysia recorded a profit of RM3.8mil for the quarter in review. This was 14% lower than the previous corresponding period due to higher operating expenses.

“Operating expenses were higher due to the increase in the cost of maintenance and supply, transportation and promotions. But, this was slightly cushioned by 0.1% increase in revenue to RM231.1mil,” the company said in a note to Bursa Malaysia.

Going forward the company said with the continuing economic recovery and impending postal tariff increase, it was optimistic on the group performance for the remaining period of the current financial year.

Earlier, Pos Malaysia was reported that it expected its revenue to rise by 15% to 18% in each of two 12-month periods after its postal tariff hike takes effect on July 1.

Apart from that, it has embarked on a three-year transformation master plan to help the company increase its revenue and profit and optimise its cost apart from strengthening its image.

Pos Malaysia had also said it did not rule out the possibility to take over the troubled Transmile. This was said by Pos Malaysia chairman Tan Sri Aseh Che Mat at the company’s AGM early last month.

The company is currently monitoring the developments in Transmile, including the progress of its debt restructuring.

The bulk of Pos Malaysia’s logistics business for east Malaysia is handled by Transmile.

For the financial year ended Dec 31, 2009 (FY09), Transmile’s net loss widened to RM270mil from RM121mil in FY08 with current debt amounting to RM500mil. Transmile is also seeking to work out a debt-restructuring exercise with its creditors, some of whom are seeking to wind up the beleagured airline company.

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The medium-term note (MTN) holders of Transmile Group Bhd, a troubled air cargo carrier, will continue with their move to wind up the company.

Sources said the five MTN holders, who are owed RM105mil, believe they have priority over the assets. They had on April 28 met to appoint receivers for the company.

The company’s other obligations included RM214mil in syndicated term loans and RM209mil in guaranteed convertible bonds.

The five MTN holders are believed to be the Employees Provident Fund (EPF), Meridian Asset Management Sdn Bhd, OSK Group, Agrobank and AmBank Group. The EPF is believed to hold around half of the notes.

A source familiar with the debt restructuring plan told StarBiz that the holders were pursuing this course because they believed management “is not serious or not willing” to negotiate in good faith to resolve the issue.

Transmile told Bursa Malaysia last Friday its legal advisers took the view that all creditors of Transmile Air Services Sdn Bhd, a wholly-owned unit of the company, ranked equally with no one lender having priority over the other.

The company said the main obstacle remained the MTN holders, who held that they had priority in ranking over all other creditors.

Transmile said this issue, once resolved, would facilitate the completion of the restructuring.

It remains confident of “reaching a mutually beneficial solution with its major lenders for its debt restructuring”.

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Transmile Group Bhd’s pre-tax loss for its fourth quarter ended Dec 31, 2009 widened by 713% to RM212.99mil from RM26.19mil in the corresponding quarter in 2008.

Its revenue dropped to RM46.66mil from RM55.69mil previously.

For the full year, Transmile’s pre-tax loss rose 123.35% to RM270.61mil from RM121.16mil in the previous year as revenue declined 48.37% to RM151.21mil from RM292.88mil.

Transmile said yesterday the group was constantly looking for new business opportunities to improve its revenue stream and profitability.

It was also looking at ways to reduce operating cost and improving productivity.

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