UMW’s 4Q and FY14 profits increase mildly, as margins in auto sector weaken

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KUALA LUMPUR (Feb 26): UMW Holdings Bhd saw its net profit rise by a marginal 2.91% to RM83.17 million or 7.12 sen per share in the fourth quarter ended Dec 31, 2014 (4QFY14), while revenue gained by a marginal 1.9% to RM3.71 billion.

Likewise, full year earnings for 2014 was largely flat at RM656.67 million, compared to RM652.93 million in FY13; while revenue increased 7.2% to RM14.96 billion.

In its financial report, UMW said it registered lower profit contribution from its key automotive segment, which was mitigated by higher contribution from the equipment, as well as oil and gas segments.

The automotive segment recorded a revenue of RM2.57 billion in 4QFY14, marginally lower than the revenue generated in the previous year’s corresponding period, due to lower sales volume and unfavourable model mix, it explained.

In line with the lower revenue, pre-tax profit for the automotive segment had decreased to RM313.1 million in 4QFY14, from RM392.4 million previously.

Nevertheless, the equipment segment contributed higher revenue of RM445.6 million in 4QFY14, compared to RM371.1 million in the corresponding period of 2013.

This was due to higher revenue recorded in the industrial and heavy equipment sub-segment, especially for Myanmar, following uplift of the suspension of mining activities in September 2014, the group said.

Consequently, pre-tax profit for the equipment segment increased to RM78.7 million in 4QFY14, from RM29.2 million previously.

Meanwhile, revenue contribution from the oil and gas segment in 4QFY14, increased 58.2% to RM327.7 million, from RM207.1 million previously.
 
The increase was mainly from the drilling services sub-segment, which saw additional contribution, especially from the deployment of its jack-up drilling rigs Naga 5 and Naga 6.

The oil and gas segment posted pre-tax profit of RM85.8 million in 4QFY14, 53.2% higher than RM56 million registered in 4QFY13.

Meanwhile, the manufacturing and engineering segment recorded lower revenue of RM173.3 million for 4QFY14, against RM181.6 million previously.

The segment however, recorded a narrower loss of RM4.4 million for 4QFY14, compared to a loss of RM14.9 million in 4QFY13, which was mainly hit by impairment of assets made during that period.

For the full year, UMW said its automotive segment contributed a higher revenue of RM10.78 billion, which was 7.5% higher from the RM10.02 billion registered in 2013.

This was due to the increase in sales volume of Toyota vehicles. Meanwhile, market share for Toyota vehicles increased marginally to 15.5% in 2014, compared to 14.1% in 2013.

However, UMW expects more intense competition in the automotive industry, with new model launches from other competitors in 2015.

It also noted that low commodity prices will affect the equipment, as well as oil and gas segments, which will be challenging this year.

UMW (fundamental: 2.2; valuation: 1.2) closed 4 sen or 0.36% higher at RM11.04, with a market capitalisation of RM12.9 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.)