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This article first appeared in The Edge Financial Daily, on May 25, 2016.

KUALA LUMPUR: The continued low oil prices, weak ringgit and soft market sentiment continued to take a heavy toll on UMW Holdings Bhd’s earnings.

Its net profit slumped 90% to RM16.58 million in the first quarter ended March 31, 2016 (1QFY16), from RM165.15 million a year ago, as revenue declined 32% to RM2.2 billion from RM3.24 billion, its bourse filing yesterday showed.

It sees a challenging year ahead and will continue to effect cost-cutting measures to mitigate market volatility’s impact on performance.

Its automotive segment’s revenue fell 22.4% year-on-year (y-o-y) to RM1.56 billion in 1QFY16, and pre-tax profit (PBT) declined to RM82.7 million; the group expects a weaker performance for the automotive segment this year, as the sector continues to be affected by stiff competition.

Its equipment segment revenue and PBT shrank 45.2% and 60.5% y-o-y to RM358 million and RM39.2 million respectively, but the segment is still expected to contribute positively to the group’s FY16. 

Its oil and gas segment saw a revenue of RM87.7 million and and pre-tax loss of RM68.4 million, on lesser time charter rates and drilling service demand, while its manufacturing and engineering segment saw RM145.5 million revenue (a y-o-y drop of 15%) on lower demand for lubricants and auto components; PBT was RM6.6 million.

“The (manufacturing and engineering) segment’s new venture into the aero business is expected to record pre-operating expenses in this year, before providing positive contribution to the segment. Nevertheless, the segment is expected to contribute positively to the group’s performance,” said UMW’s president/chief executive Badrul Feisal Abdul Rahim in a separate statement.

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