KUALA LUMPUR (May 19): High raw material costs ate into biscuit maker Hup Seng Industries Bhd's earnings, despite an increase in product selling prices.

The company's net profit shrank by nearly one-third to RM6.77 million in the first quarter ended March 31, 2022 (1QFY22) against RM9.87 million a year ago due to a spike in input costs, said Hup Seng in a bourse filing on Thursday (May 19).

Quarterly revenue dropped marginally by 4.21% to RM79.26 million from RM82.74 million as the home market saw a decline of about 7% or RM4.3 million as a result of lower offtake from all channels.

Its earnings per share fell to 0.85 sen from 1.23 sen a year earlier.

Export market, mainly Thailand and Saudi Arabia, grew 5% or RM800,000 compared to the previous corresponding period.

On prospects, Hup Seng noted that although most countries have lifted Covid-19 restrictions and reopened borders, many manufacturers are still struggling with supply chain delays and rising costs.

The geopolitical uncertainty caused by the Russia-Ukraine conflict has compounded the supply disruptions of commodities, which resulted in even higher prices, said Hup Seng.

It also said that the selling prices to all domestic outlets which were increased progressively with effect from January this year were not able to mitigate the impact, with the continuous escalation of prices of materials and energy costs.

"The operating environment is expected to be highly competitive and challenging and the group will look into various alternatives to protect margins in the long run.

"Nevertheless, the group will continue to maintain and improve product quality, innovating products portfolio, reducing costs and broadening the distributor network to safeguard revenue and address the needs of consumers," added Hup Seng.

Hup Seng's share price dropped 0.5 sen to 83 sen, bringing the group a market capitalisation of RM664 million.