Tan Chong 1Q profit shrinks 36.5% due to higher imported input costs

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KUALA LUMPUR (May 13): Tan Chong Motor Holdings Bhd’s net profit contracted 36.5% to RM26.3 million in the first quarter ended Mar 31, 2015, from RM41.5 million in the previous corresponding quarter.

Its automotive division recorded lower EBITDA of RM73.3 million due to higher completely knocked down (CKD) kits cost.

The higher cost arose from unfavourable foreign exchange rate compared to the same quarter last year, Tan Chong (fundamental: 0.85; valuation: 2) told Bursa Malaysia in a statement.

But automotive revenue came higher at RM1.55 billion, up 24.6%.

Likewise, Tan Chong’s total revenue for the quarter jumped 24.5% to RM1.57 billion from RM1.26 billion a year earlier.

The auto maker noted it was operating in a highly competitive business environment with festivities driven sales promotion campaigns and pre-goods and services tax (GST) sales activities.

On current year prospects, Tan Chong said it is still “early” to assess the full impact of GST on sales as consumers’ sentiment is quite fragile due to the higher cost of living post GST.

The group is concern on the continued weakening of the ringgit against the US dollar, which resulted in higher cost for imported parts.

“We will take diligent steps to monitor the foreign currency risk and maintain profitability throughout the year to ensure business sustainability,” it said.

Tan Chong share price has halved since January last year, falling from RM6.08 on to RM3.05 today, giving it a market capitalisation of RM1.96 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)