KUALA LUMPUR (Oct 21): Gadang Holdings Bhd saw its net profit for the first quarter ended August 31, 2020 (1QFY21) rise 35.64% to RM548,000 from RM404,000 in the immediate preceding quarter (4QFY20).

This was despite a 0.18% dip in revenue to RM115.39 million from RM115.6 million in the previous quarter, according to Bursa filings.

The group noted its profit before tax fell 67.86% to RM2.06 million from RM6.41 million in 4QFY20, mainly due to an RM1.4 million fair value loss on quoted investment and an unfavourable foreign exchange translation of RM1.6 million recorded in the current quarter.

On a yearly basis, net profit slumped 96.31% from RM14.85 million in 1QFY20 due to lower contribution from the construction division and unfavourable foreign exchange translation.

The group said its revenue for the first quarter also fell 21.82% year on year to RM115.39 million, from RM147.6 million a year ago.

The group noted its construction segment revenue for the quarter decreased to RM83.14 million compared with RM108 million in the corresponding quarter of the preceding year.

Profit before tax for the segment also decreased significantly to RM350,000 compared with RM16.83 million in the corresponding quarter of the preceding year, mainly due to lower profit margin for on-going projects.

“The board anticipates continuous business disruptions arising from the impact of the new waves of COVID-19 cases nationwide. Accordingly, the group is undertaking a progressive cost rationalization exercise to realign and streamline its cost structure to stay resilient,” it said.

It expects the financial year to be challenging as the construction division is expected to be greatly affected by the Government’s reduced large infrastructure spending.

“Controlling and managing project cost is another inherent concern due to the overall competitive business environment, resulting in lower projects' profit margins going forward,” it said.

It also expects its property division to remain sluggish with poor consumer sentiment in the short and medium term.

“However, the management is still pursuing its property launches for affordable homes located in strategic choice locations,” it said.

While the utility division's concession water treatment assets have not been significantly impacted by the pandemic in Indonesia and will continue to contribute a stable and sustainable recurring income stream to the group, it warned that the pandemic may further delay the testing and commissioning of the mini hydro power plant.

“Furthermore, the volatility of the foreign exchange rates may impact the division's performance in the forthcoming financial year,” it added.

Gadang’s share price fell 1 sen or 2.5% to 39 sen, valuing the firm at RM283.94 million.