KUALA LUMPUR (Dec 14): V.S. Industry Bhd's net profit fell 7.1% to RM39.81 million for the first financial quarter ended Oct 31, 2018 (1QFY19) from RM42.87 million a year ago, mainly due to a loss on disposal of a subsidiary and foreign exchange loss.

This resulted in a lower earnings per share of 2.32 sen for 1QFY19 compared with 2.61 sen for 1QFY18.

Quarterly revenue was flat at RM1.08 billion compared with RM1.07 billion a year ago.

Nevertheless, the group declared a first interim dividend of one sen per share for the financial year ending July 31, 2019 (FY19), payable on March 12, 2019.

On prospects, V.S. Industry said it is cognisant of the challenges ahead, and together with the management, are taking necessary steps to manage the situation.

It noted that operating environment in Malaysia remains challenging and competitive, with rising costs putting strain on profitability. "We are committed to improving overall operational efficiency as countermeasures to contain cost pressure," it added.

The group also warned that prospects in the second half of FY19 are expected to weaken as it anticipates order flow from a key customer to decline.

"This would, in turn, affect our level of profitability. In mitigation, we are in serious discussions with several prospective multinational corporation customers to secure new orders that would fill up the excess capacity," said V.S. Industry.

Over in China, V.S. Industry said the outlook also appears to be difficult at this juncture given the uncertainties that include the US-China trade war, rising operating cost structure and intense competition.

"The issue of under-utilisation of capacity is expected to prevail at this juncture. As countermeasures, management is currently streamlining operations and pursuing an asset-light strategy to improve its positioning and operational flexibility," it said.

Given the challenging outlook, V.S. Industry opines that the financial performance of the group in the second half of FY19 will be affected by the anticipated lower sales order.

Shares of V.S. Industry closed down 15 sen or 11.36% to RM1.17 today, with 16.98 million shares traded, for a market value of RM2.1 billion.