Tuesday, 29 August 2017

Loss arising from demerger drags UMW Holdings deeper into the red in 2Q


Tan Xue Ying/theedgemarkets.com
August 28, 2017 21:24 pm MYT

KUALA LUMPUR (Aug 28): UMW Holdings Bhd's quarterly net loss widened to RM209.3 million from RM12.13 million, dragged down by one-off losses arising from its demerger exercise of associate UMW Oil & Gas Corp Bhd (UMW-OG).

For the second quarter ended June 30, 2017 (2QFY17), the Group posted 2.54% growth in revenue, from RM2.72 billion to RM2.79 billion, mainly attributed to higher top line contribution from its automotive business segment.

Losses per share expanded to 17.92 sen from 1.04 sen in 2QFY16, according to the filing with Bursa Malaysia this evening.

UMW Holdings noted that for the first six-month period ended June 30 (1HFY17), UMW Holdings posted net loss of RM189.14 million, compared with a net profit of RM4.45 million in the previous corresponding period.

This is despite a 14.2% year-on-year revenue growth for the cumulative period, from RM4.83 billion to RM5.51 billion.

For the quarter under review, the group said in its bourse filing that while its automotive business segment enjoyed higher revenue due to the surge in demand for Toyota Innova and Fortuner models, margins were crimped by the higher cost of imports with the strengthening of the US dollar.

Its equipment segment delivered consistent revenue in the quarter, however with lower earnings seen amid squeezed margins.

The group's manufacturing and engineering segment was loss-making in 2QFY17, due to pre-operating expenses incurred for its aerospace business.

Losses at its unlisted oil & gas segment widened in 2QFY17 due to the lower revenue and redundancy expenses incurred on the cessation of drilling operations in Oman.

“As per our strategy, we have successfully completed the demerger within the said timeframe and the exit will provide the platform for the group to emerge as a stronger, more competitive industrial conglomerate with increased capacity for expansion.

“The demerger has resulted in reduced exposure to debt and a strengthened balance sheet, thus improving our financial position to enable new and accretive investments which will spur the growth of our core business segments moving forward”, said UMW Holdings' president and group chief executive officer, Badrul Feisal Abdul Rahim, in a statement.

He added that UMW Holdings’ overall performance will continue to be impacted by headwinds in the oil & gas sector until full completion of the exit plan, and gave assurance that there may be considerable milestones achieved by the end of the year.

On a more positive note, it said that UMW Toyota Motor is on track to achieve its full-year sales target of 70,000 units for 2017, and that its fan case project is progressing as per schedule and delivery is expected to commence in the final quarter of this year.

UMW Holdings’ share price has climbed 36% year to date, rising from the low of RM4.22 end-2016 to RM5.75 today with market capitalisation of RM6.65 billion.


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