KUALA LUMPUR (Dec 12): Furniture-maker Poh Huat Resources Holdings Bhd's net profit rose 16.9% to RM20.86 million in the fourth financial quarter ended Oct 31, 2018 (4QFY18) from RM17.84 million a year ago, on higher sales from both its Malaysian and Vietnamese operations.

This resulted in a higher earnings per share of 9.5 sen for 4QFY18 compared with 8.35 sen for 4QFY17.

Quarterly revenue also grew 10.4% to RM189.51 million from RM171.68 million a year ago on higher shipment of furniture from its Malaysian operations.

The group has also proposed a final dividend of 2 sen per share for the shareholders’ approval at the forthcoming annual general meeting. This will bring total dividends for the financial year ended Oct 31, 2018 (FY18) to 6 sen per share.

In a filing with Bursa Malaysia today, Poh Huat said its Malaysian operations continued to do well as it received more orders for its panel-based bedroom sets for the US market.

"In the US, panel-based furniture has been seeing greater demand as first time house owners and urban dwellers opted for more affordable, ready-to-install furniture. Shipment of traditional office furniture remained strong.

"Shipment of furniture from our Vietnamese operations increased moderately as the group has been updating and adjusting its product mix, mainly to meet the change in consumer preferences," it added.

For the full FY18, the group's net profit, however, fell 15.5% to RM47.14 million from RM55.77 million in the previous year, while revenue increased by a marginal 1.2% to RM621.93 million from RM614.27 million in FY17.

For FY18, Poh Huat said its average gross profit margin was lower at 16.4% against 19.9% in FY17, which it attributed to higher raw material and manufacturing overhead costs which rose to 59.7% and 11.8% of total sales respectively from 55.9% and 10.5% in FY17.

"Labour costs however fell to 12.7% of total sales in FY18 from 13.9% in the previous year, due mainly to the higher sales of panel-based products from our Malaysian operations," it added.

On prospects, Poh Huat said the US furniture and furnishing sector continues to do well as households have more cash to spend due strong employment, wage growth and the recently-approved US tax cuts.

"The positive outlook notwithstanding, tighter supply and higher expectation of interest rate hike have resulted in higher house prices and rising mortgage rate, making home ownership less affordable. A prolonged slowdown on household formation, especially among the young, may have adverse impact on the demand and pricing for our products," it warned.

At the same time, the imposition of duties on China-sourced furniture, while at a reduced rate of 10%, has resulted in furniture made elsewhere being more competitive.

"US furniture importers, which have already responded by diverting part of their orders to other furniture exporters in Southeast Asia prior to the imposition of the duties, will likely place more orders with producers in Vietnam and Malaysia," it said.

"We are mindful of the depleting timber resources, rising labour costs and foreign exchange volatility, which may have adverse impact on our operations and financial performance. We will work closely with our customers to mitigate increases in raw material prices, labour costs and pricing adjustments due to exchanges rates fluctuations," added Poh Huat.

Poh Huat shares closed down two sen or 1.33% at RM1.48 today, giving it a market capitalisation of RM345.18 million.