UMW Holdings Bhd’s core business segments of Automotive, Equipment and Manufacturing & Engineering (M&E) recorded higher revenue in the second quarter of 2018 mainly due to increased consumer demand arising from the Goods and Services Tax (GST) – free period in Malaysia.
Consequently, the Automotive and Equipment segments registered higher profit before taxation (PBT) of 43.9% and 17.4%, respectively. UMW’s new aerospace business has started to generate revenue, contributing to 15.9% revenue growth for the M&E segment. As a result, the segment registered a substantially lower loss before taxation than in the previous corresponding quarter. The loss is expected as the aerospace business is still in its gestation period.
UMW Holdings Berhad President & Group CEO, Badrul Feisal bin Abdul Rahim said, “Following the Group’s strategic decision in 2017 to refocus on strengthening our three core businesses, we have managed to deliver healthy results. Overall, the Group’s net profit rose to RM124.4 million for the second quarter of 2018, against a loss of RM209.3 million recorded in the same quarter of 2017. It is also substantially higher than the RM74.1 million recorded in the first quarter of 2018, representing a net profit growth of 67.9%. The Group is now firmly on the recovery path and we are in an even better position to execute our long-term growth strategy and enhance shareholder value.”
The Group registered revenue of RM2,919.1 million from Continuing Operations for the second quarter ended 30 June 2018, an increase of RM161.6 million or 5.9% over the RM2,757.5 million recorded in the same quarter of 2017.
The Group posted a PBT from Continuing Operations of RM301.3 million for the second quarter, significantly higher than the RM48.3 million recorded in the previous corresponding quarter.
The improved performance was driven by higher contribution from the Automotive and Equipment segments, and the reversal of provisions. The Group posted a loss before taxation from Discontinued Operations of RM121.9 million, substantially lower than the loss of RM237.8 million registered in the same period of 2017.
Operations in the Oil & Gas (unlisted) segment have been scaled down and the management is actively executing the divestment strategy. Overall, for the second quarter of 2018, the Group’s net profit rose to RM124.4 million compared to a loss of RM209.3 million recorded in the corresponding quarter of 2017.
The Automotive segment reported a revenue of RM2,382.7 million in the second quarter of the year, 5.4% higher than the RM2,260.3 million registered in the previous corresponding quarter. Sales improved substantially following increased customer demand arising from the GST-free period in Malaysia and the launch of a new model during the quarter.
Consequently, PBT increased by 43.9% from RM99.0 million in the same quarter of 2017 to RM142.4 million in the current quarter, mainly contributed by better performance from an associate company and improved profit margins due to the strengthening of Ringgit Malaysia against the US Dollar.
The Equipment segment registered revenue of RM365.9 million in the second quarter of 2018, 4.2% higher than the RM351.4 million reported in the previous corresponding quarter. The performance of the heavy equipment business was lifted by higher export sales and increased demand in the construction industry. Subsequently, the segment registered a PBT of RM37.8 million for the second quarter of 2018, 17.4% higher than the previous corresponding quarter of RM32.2 million.
The M&E segment reported 15.9% higher revenue of RM178.3 million as compared with RM153.9 million in the same quarter of 2017. The segment registered a loss before taxation of RM0.5 million for the second quarter of 2018, substantially lower than a loss of RM9.6 million in the previous corresponding quarter.
The improved performance was mainly driven by revenue contribution from the Aerospace business as well as better profit margins earned from the strengthening of Ringgit Malaysia against other major currencies.
Moving forward, the Group is bracing itself for the reintroduction of the Sales and Service Tax (SST) on 1 September 2018, which could dampen consumer demand in the Automotive segment. For the Equipment segment, the heavy equipment business may be impacted by the on-going review of mega infrastructure projects in the country.
Nevertheless, given the current level of orders secured, the business is expected to perform satisfactorily. Furthermore, the industrial equipment rental business is expected to perform well in the second half of the year, driven by demand from the warehouse and logistics sector.
In the M&E segment, sustained demand for auto components and lubricants is forecast to contribute to better results. Moreover, the aerospace business is currently producing and delivering the fan cases to Rolls-Royce as per the contractual requirement. Overall, the Group is expected to perform satisfactorily for financial year 2018.
