Unaudited Financial Statements And Dividend Announcement For The Second Quarter Ended 30 June 2018
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For the 3 months ended 30 June 2018 (“2Q2018”) and 6 months ended 30 June 2018 (“1H2018”)
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Review of Group’s performance for the 3 months ended 30 June 2018 (“2Q2018”) as compared to the 3 months ended 30 June 2017 (“2Q2017”)Revenue
The Group’s revenue decreased by approximately RM17.3 million, or 21.5%. This was mainly attributable to:
- the decrease in the number of container loaded with products (“40-ft containers”) sold from 1,585 40-ft containers in 2Q2017 to 1,295 40-ft containers in 2Q2018 due to the decrease in the demand from customers mainly from the United States of America as a result of a drop in demand from their end customers; and
- the decrease in the average selling price per container from RM51,000 in 2Q2017 to RM49,000 in 2Q2018 due to the strengthening of the RM against US$. The average movement of RM against USD has been strengthened by approximately 8.8% in 2Q2018 as compared to 2Q2017.
Cost of sales and gross profits
The cost of sales decreased by approximately RM11.3 million, or 18.5% mainly due to the decrease in raw materials purchased, labour costs and subcontractors’ costs. The decrease in these costs was mainly due to the lower level of production during 2Q2018.
The gross profit decreased by approximately RM6.0 million, or 31.5%, and overall gross profit margin decreased from 23.6% in 2Q2017 to 20.6% in 2Q2018 as a result of the decrease in the average selling price arising from the strengthening of the RM against US$. As explained above, the average RM against the US$ has strengthened by approximately 8.8% in 2Q2018 as compared to 2Q2017.
Interest income decreased by approximately RM0.07 million, or 30.7% mainly due to lower interest rate for cash being placed under short term deposits.
Other income decreased by approximately RM0.3 million, or 9.3% mainly due to lesser sales of scrap materials and the absence of net fair value gain on derivatives.
Selling and administrative expenses
Selling and administrative expenses increased by approximately RM1.0 million, or 16.2% mainly due to the increase in depreciation of property, plant and equipment as a result of acquisition of new machineries, wastage disposal costs and Directors’ remuneration.
Other expense decreased by approximately RM1.7 million, or 100.0% mainly due to net foreign exchange gain recorded in the books of the Group in 2Q2018 as compared to 2Q2017 as the Group was holding lesser USD-denominated assets in 2Q2018 as compared to 2Q2017.
Profit for the period
As a result of the foregoing, the Group’s net profit for 2Q2018 decreased by approximately RM4.3 million, or 39.8% as compared to 2Q2017.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Review of the Group’s financial position as at 30 June 2018 as compared to 31 December 2017
Property, plant and equipment increased by approximately RM3.0 million, or 2.6% mainly due to the purchase of machinery and equipment as well as a motor vehicle during the 6 months period ended 30 June 2018 (“6M2018”).
Leasehold land decreased by approximately RM0.2 million, or 1.2% due to the amortisation of the leasehold land.
Inventories increased by approximately RM2.3 million, or 6.1% mainly due to the increase in the Group’s inventories towards the end of 6M2018 to meet the orders in the following quarter.
Trade and other receivables of approximately RM39.4 million comprised trade receivables, receivables from related parties, contract assets, deposits and other receivables. The decrease in trade and other receivables by approximately RM9.9 million, or 28.4% was mainly due to the decrease of sales towards the end of 6M2018.
Prepaid operating expense of approximately RM0.6 million comprised mainly of expenses paid in advance as at 30 June 2018. The decrease in the prepaid operating expense was due to IPO expenses either being expensed off to the income statement or capitalised to equity in 6M2018.
Current liabilities and non-current liabilities
Loans and borrowings comprised of obligations under finance leases, short term trade financing and bankers’ acceptance. The decrease in loans and borrowings by approximately RM2.0 million, or 21.9% was mainly due to the decrease in the usage of short term trade financing towards the end of 6M2018.
Trade and other payables of approximately RM21.3 million comprised trade payables, amount due to related parties, contract liabilities and sundry payables. The decrease in trade payable and other payables of RM9.3 million, or 30.4% was mainly due to the settlement of debts towards the end of 6M2018.
Other liabilities of approximately RM3.9 million comprised of accrued operating expenses, advances from customers and accrual for purchase of equipment. The decrease in other liabilities of RM0.9 million, or 18.4% was mainly due to lesser accrued expenses as at 30 June 2018 as a result of lesser allowances and performance incentives being provided.
REVIEW OF THE GROUP'S CASH FLOW STATEMENT
Review of the Group’s cash flow statement for 2Q2018 as compared to 2Q2017
The Group recorded net cash flows from operating activities of approximately RM1.0 million in 2Q2018 which was lower as compared to approximately RM12.1 million in 2Q2017 mainly due to the decrease in the sales of the Group during the 2Q2018.
The Group recorded net cash flows used in investing activities of approximately RM2.1 million in 2Q2018 mainly due to the purchase of new machineries with improved capabilities.
The Group recorded net cash flows used in financing activities of approximately RM12.3 million in 2Q2018 mainly due to the dividend paid during the period.
- In view that the Malaysian Ringgit (“RM”) has strengthened against United States Dollar (“USD”) since the last quarter of financial year 2017, the Group has constantly engaged with its customers where the majority of its products will be based on new prices which reflect the latest exchange rates for the coming new orders. While the Group acknowledges that the unfavourable exchange rate may affect its financial results, the Group expects the impact, if any, of such exchange rate to be short term given the Group’s ability to adjust the products’ selling prices determined in RM with the fluctuation in RM against USD. In addition, the Group will continue to review its hedging policy and strategy from time to time to manage its foreign exchange exposure.
- The prices of most of the raw materials currently used by the Group, have stabilised. However, the Group will continue to engage its suppliers to negotiate for more favourable prices through arrangements such as bulk purchases and early cash payments.
- As at the date of this report, we have implemented the LY-6M system and engaged an Information Technology auditor to conduct a review on the LY-6M system post-implementation.