The $20 million rights issue proposed by Rachina Pacific has encountered more problems with two of the shareholders taking legal action to prevent the raising of capital to invest in their Chinese leather business.

Richina Pacific have admitted that their trading position statement after the first quarter ended March 31, 2003, needs to be updated:

. In moving to manufacturing upholstery leather for sale under their own brand, Shanghai Richina Leather have encountered delays in re-establishing the business with new customers, and there have also been some quality issues. This has resulted in some credits being issued to customers and a slow down in activities while remedial action was initiated.

. The ovine garment leather sector is not currently strong and key customers are delaying confirmation and delivery of orders.

While these events are not major in terms of annual expectations they will impact on the first quarter’s performance. March results, which will assist the company to regain from a somewhat slow start to the year, will not be sufficient to put the company above last year to date as was stated at the April 2 meeting.

Expectations are, however, little changed for the half and full year and the company are anticipating a solid half and full-year result ahead of last year’s profits of $4.2 million and $8.2 million respectively.