Unaudited Financial Statements And Dividend Announcement For The Third Quarter Ended 30 September 2019
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For the 3 months ended 30 September 2019 (“3Q2019”) and 9 months ended 30 September 2019 (“9M2019”)
Consolidated Statements of Comprehensive Income
Review of Performance
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Review of Group’s performance for the 3 months ended 30 September 2019 (“3Q2019”) as compared to the 3 months ended 30 September 2018 (“3Q2018”)Revenue
The Group’s revenue increased by approximately RM14.7 million, or 28.4%. This was mainly attributable to the increase in the number of container loaded with products (“40-ft containers”) sold from 1,102 40-ft containers in 3Q2018 to 1,316 40-ft containers in 3Q2019 as a result of higher demand from the Group’s customers mainly from the United States of America (“US”).
The average selling price per 40-ft container has increased from RM47,000 in 3Q2018 to RM50,000 in 3Q2019 due to strengthening of USD to RM. The increase was slightly offset by the Group’s different product mix whereby the Group sells more paper laminated products which have lower selling prices compared to veneer-laminated and spray-painted products.
Cost of sales and gross profits
The cost of sales increased by approximately RM15.4 million, or 37.5%, 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 3Q2019 to cater for the production to meet the increased demand in 3Q2019 and the expected orders in the following quarter.
The gross profit decreased slightly by approximately RM0.7 million, or 7.4%. The overall gross profit margin decreased from 20.2% in 3Q2018 to 14.5% in 3Q2019 mainly due to the different product mix sold during the 3Q2019 led to higher proportionate increase in raw materials purchased, labour costs and sub contractors’ costs.
Other income comprised mainly sales of timber, boards, hardware and scrap; charges for services provided such as transportation; rental received and gain on disposal of property, plant and equipment.
Other income decreased by approximately RM2.4 million, or 83.0%, mainly due to the Group selling lesser boards to LP Global Resources Sdn Bhd (“LP Global”) to manufacture front drawers (including lamination services) for our products in 3Q2019 as compared to 3Q2018.
Selling and administrative expenses
Selling and administrative expenses slightly increased by approximately RM0.3 million, or 5.5%, mainly due to the increase in professional fees, service tax and depreciation on property, plant and equipment.
Other expense increased by approximately RM0.07 million due to net foreign exchange loss recorded in the books of the Group in 3Q2019 as compared to a net foreign exchange gain recorded in 3Q2018.
Profit for the period
As a result of the foregoing, the Group’s net profit for 3Q2019 decreased by approximately RM3.0 million, or 44.5%, as compared to 3Q2018.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Review of the Group’s financial position as at 30 September 2019 as compared to 31 December 2018
Property, plant and equipment increased by approximately RM14.3 million, or 12.0%, mainly due to the purchase of machinery and equipment and motor vehicles during the 9 months period ended 30 September 2019 (“9M2019”).
Leasehold land decreased by approximately RM0.3 million, or 1.9%, due to the amortisation of the leasehold land.
Intangible assets of approximately RM3.8 million consists of trademarks and goodwill arising from provisional purchase price allocation from the completion of the acquisition announced on 28 January 2019.
Right-of-use assets of approximately RM4.6 million comprised the right to use the properties by the Group over the respective lease period.
Inventories increased by approximately RM16.3 million, or 47.1%, mainly due to the increase in the Group’s inventories towards the end of 9M2019 to meet the orders in the following quarter.
Trade and other receivables of approximately RM23.1 million comprised trade receivables, receivables from related parties, deposit and other receivables. The increase in trade and other receivables by approximately RM0.3 million, or 1.3%, was mainly due to the increase of sales towards the end of 9M2019.
Contract assets of approximately RM5.6 million comprised the right to consideration for goods produced but not yet billed as at 30 September 2019 for sale of goods. The decrease in contract assets by approximately RM5.2 million, or 47.8%, was mainly due to the decrease in the completion of goods produced expected to be delivered after the third quarter of 2019.
Prepaid operating expense of approximately RM0.6 million comprised mainly expenses paid in advance as at 30 September 2019. The decrease in the prepaid operating expense as at 30 September 2019 as compared to 31 December 2018 was due to expenses being paid in advance as at 31 December 2018 but were subsequently expensed off to the income statement by 30 September 2019.
Current liabilities and non-current liabilities
Loans and borrowings comprised of obligations under finance leases and bankers’ acceptance. The increase in loans and borrowings by approximately RM1.3 million, or 38.1%, was mainly due to the increase in the usage of bankers’ acceptance towards the end of 9M2019.
Trade and other payables of approximately RM34.9 million comprised trade payables, amount due to related parties and sundry payables. The increase in trade payables and other payables of RM12.2 million, or 53.5%, was mainly due to the increase in purchase of raw materials towards the end of 9M2019.
Contract liabilities of approximately RM0.2 million comprised the Group’s obligation to transfer goods or services to customers for which the Group has received consideration from customers as at 30 September 2019.
Lease liabilities of approximately RM4.7 million comprised the liabilities that the Group has to pay over the life of the leases for the use of the properties.
REVIEW OF THE GROUP'S CASH FLOW STATEMENT
Review of the Group’s cash flow statement for 3Q2019 as compared to 3Q2018
The Group recorded net cash flows used in operating activities of approximately RM7.0 million in 3Q2019 which was lower as compared to net cash flow from operating activities approximately RM1.9 million in 3Q2018 mainly due to the increase in inventories and trade and other receivable of the Group during the 3Q2019.
The Group recorded net cash flows used in investing activities of approximately RM9.5 million mainly due to the purchase of new and used machineries as well as motor vehicles.
The Group recorded net cash flows from financing activities of approximately RM1.5 million mainly due to the proceeds from short term financing offset by repayment of loans and borrowings in 3Q2019.
- Our exports to US have reduced since financial year ended 31 December 2018 as many US customers have exercised more caution in their purchases due to the uncertainties in the trade war between China and US. As the trade war is still on–going, there is still uncertainty as to how this trade war will impact our Group in the financial years ending 31 December 2019 (“FY2019”) and 2020 (“FY2020”). Nevertheless, we have seen signs of improvement beginning July 2019, with more purchases from our US customers. Therefore, we are cautiously optimistic of an improvement in FY2020, amid the on-going trade war.
- Apart from the sale of our bedroom furniture, we have begun the expansion of our revenue base to include other categories of wooden products.