Unaudited Financial Statements And Dividend Announcement For The First Quarter Ended 31 March 2018
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For the 3 months ended 31 March 2018 ("1Q2018") and 3 months ended 31 March 2017 ("1Q2017")
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Review of Group's performance for the 3 months ended 31 March 2018 ("1Q2018") as compared to the 3 months ended 31 March 2017 ("1Q2017")Revenue
The Group's revenue increased by approximately RM1.5 million, or 1.8% mainly due to the increase in the number of 40-ft containers sold from 1,560 40-ft containers in 1Q2017 to 1,681 40-ft containers in 1Q2018 due to the increase in the demand from customers mainly from the United States of America.
However, the decrease in the average selling price per container loaded with products ("40-ft container") from RM54,000 in 1Q2017 to RM50,000 in 1Q2018 was due to the strengthening of the RM against US$. The average movement of RM against USD has been strengthened by approximately 11.7% in 1Q2018 as compared to 1Q2017.
Cost of sales and gross profits
The cost of sales increased by approximately RM6.6 million, or 10.3% mainly due to the increase in raw materials purchased, labour costs and subcontractors' costs. The increase in these costs was mainly due to the higher level of production during 1Q2018 to cater for the production to meet the increased demand in 1Q2018.
The gross profit decreased by approximately RM5.0 million, or 24.9% as a result of the decrease in the average selling price arising from the strengthening of the RM against US$. The overall gross profit margin decreased from 24.1% in 1Q2017 to 17.8% in 1Q2018 mainly due to the strengthening of the RM against US$. As explained above, the average RM against the US$ has strengthened by approximately 11.7% in 1Q2018 as compared to 1Q2017.
Interest income decreased by approximately RM0.08 million, or 40.6% mainly due to less cash being placed under short term deposits.
Selling and administrative expenses
Selling and administrative expenses increased by approximately RM2.2 million, or 38.7% mainly due to the increase in freight and handling charges, upkeep and maintenance costs of the property, plant and equipment, wastage disposal costs and Directors' remuneration.
Other expense increased by approximately RM0.8 million, or 38.3% mainly due to net foreign exchange loss recorded in the books of the Company in 1Q2018 as compared to 1Q2017 due to the appreciation of the RM against US$ as the Company holds some of their cash in US$ for daily operating purposes.
Loss for the period
As a result of the foregoing, the Group incurred a net loss of RM2.8 million for 1Q2018 as compared to a net profit of RM10.4 million in 1Q2017. However, excluding the nonrecurring IPO expenses of approximately RM6.8 million in 1Q2018, the Group would have generated a net profit of approximately RM4.0 million for 1Q2018.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Review of the Group's financial position as at 31 March 2018 as compared to 31 December 2017
Property, plant and equipment increased by approximately RM2.3 million, or 2.0% mainly due to the purchase of machinery and equipment as well as a motor vehicle in 1Q2018.
Leasehold land decreased by approximately RM0.1 million, or 0.6% due to the amortisation of the leasehold land.
Inventories decreased by approximately RM1.9 million, or 5.1% mainly due to the Group reduce its inventories towards the end of 1Q2018.
Trade and other receivables of approximately RM28.7 million comprised trade receivables, receivables from related parties, contract assets, deposit and other receivables. The decreased in trade and other receivables by approximately RM5.9 million, or 17.0% was mainly due to the decrease of sales towards the end of 1Q2018.
Prepaid operating expense of approximately RM0.3 million comprised mainly of expenses paid in advance as at 31 March 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 1Q2018.
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 RM1.0 million, or 11.0% was mainly due to the decrease in the usage of short term trade financing towards the end of 1Q2018.
Trade and other payables of approximately RM28.9 million comprised trade payables, amount due to related parties, contract liabilities and sundry payables. The decreased in trade payable and other payables of RM1.7 million, or 5.5% was mainly due to the decrease in purchase of raw materials towards the end of 1Q2018.
REVIEW OF THE GROUP'S CASH FLOW STATEMENT
The Group recorded net cash flows from operating activities of approximately RM13.7 million in 1Q2018 which was higher as compared to approximately RM9.7 million in 1Q2017 mainly due to the expenses incurred for listing purposes. However, excluding the non-recurring items (such as the listing expenses of approximately RM6.8 million in 1Q2018 as disclosed above), the Group would have recorded net cash flows from operating activities of approximately RM6.9 million in 1Q2018 which was lower as compared to approximately RM9.7 million in 1Q2017 mainly due to the increase in the requirement for working capital.
The Group recorded net cash flows used in investing activities of approximately RM3.1 million mainly due to the purchase of new machineries with better features as well as a motor vehicle.
The Group recorded net cash flows from financing activities of approximately RM37.8 million mainly due to the proceeds received from the issuance of new shares pursuant to the IPO.
- In view that the Malaysian Ringgit ("RM") has strengthened against United States Dollar ("USD") recently, 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 strategy from time to time to manage its foreign exchange exposure.
- Raw material prices have continued to increase since its IPO, albeit at a lower rate of increase for most of the raw materials that are currently used by the Group. The Group is cautiously optimistic that the raw material prices will stabilise over the next few months. Nevertheless, the Group will continue to engage its suppliers to negotiate for more favourable prices through arrangements such as bulk purchases and early cash payments.