KUALA LUMPUR (Aug 23): Boustead Heavy Industries Corp Bhd (BHIC) saw its net profit contract 59% year-on-year in the second quarter of financial year 2019 (2QFY19) despite higher revenue, following lower contributions from joint venture (JVs), higher finance costs, and as negative contribution from associates widened.

Net profit for the quarter that ended June 30, fell to RM2.94 million from RM7.22 million, which pushed earnings per share down to 1.18 sen from 2.90 sen. Revenue was up 10% at RM53.93 million versus RM49.16 million previously.

Share of BHIC's JV results fell 71% to RM1.85 million from RM6.49 million, while its associates' contribution widened to a loss of RM3.02 million from RM1.86 million. Finance cost, meanwhile, climbed 23% to RM4.2 million from RM3.42 million. A higher taxation of RM1.95 million versus RM377,000 previously, also did not help.

Following the weaker quarter, the group fell into the red in the first half ended June 30 (1HFY19) with a net loss of RM1.36 million, versus a net profit of RM11.72 million in the corresponding period last year, though revenue inched up 2% to RM90.23 milion from RM88.88 million.

Consequently, it recorded a loss per share of 0.55 sen for the period under review, versus an EPS of 4.72 sen previously.

The group attributed its half-year loss to lower contributions from its JVs, negative contributions from associate companies, and higher finance costs.

On prospects, the group said the Defence White Paper, drafted by the Ministry of Defence and expected to be tabled by October, will establish the long term plan for Malaysia’s defence capability.

“The group is encouraged by the opportunities ahead, led by the group’s defence segment which has been awarded various contracts by the government,” BHIC said.

It added that the construction of its littoral combat ship (LCS) programme is still ongoing, and the keel-laying ceremony of LCS5 is expected to be held in the fourth quarter of 2019.

In addition, the group plans to expand its customer base to other government agencies such as the Royal Malaysia Police, the Malaysian Maritime Enforcement Agency and the Malaysian Fisheries Department, as well as venture into the Middle East and Southeast Asia markets.

“While there has been a rejuvenation of activities in the oil and gas industry, we do not foresee a sharp turnaround in the performance of our Energy segment. Likewise, the group does not expect its commercial shipbuilding segment turning the corner anytime soon, as the shipping sector continues to be saddled by overcapacity, low freight and tight financing. However, the group will continue to explore new business areas such as undertaking MRO (maintenance, repair and overhaul) on commercial vessels,” the group said.

BHIC shares were no traded today. It last settled at RM1.29 on Wednesday, giving it a market capitalisation of RM320.51 million.