KUALA LUMPUR (March 12): Hit by the US-China trade war, KESM Industries Bhd saw its second quarter net profit plunge 95.76% to RM474,000 from RM11.18 million a year ago. 

Earnings per share for the quarter ended Jan 31, 2019 (2QFY19) fell to 1.1 sen from 26 sen, the chip-testing company said in a filing with the stock exchange. 

Revenue for the quarter fell 11.33% to RM81.11 million, versus RM91.47 million a year earlier. The group attributed this to lower demand for burn-in and testing services, offset by higher revenue from rendering of electronic manufacturing service to new customers.   

Total net profit for the first two quarters sank 86.19% to RM3.12 milion, from RM22.55 million for the previous corresponding period (2QFY18). 

Half-year revenue (1HFY19) was down 10.71% to RM162.66 million, from RM182.18 million previously. 

“As expected, the U.S. and China trade war weakened our strong growth,” said KESM chairman and chief executive officer Sam Lim in a statement. 

“Cautious customers took steps to institute tighter inventory control measures. Profitability was also adversely affected by lower margin, despite the increase in our electronic manufacturing services activities from new customers,” he said.   

Still, KESM believes its strong fundamentals have not changed, as it is foresees increases in semiconductor content in cars and the need for reliability, security and safety will expand the need for burn-in and testing, Lim added.
 
“We are seeing upticks on newer applications in the automotive market. Many of these product innovations have completed their design verification and extensive production qualifications which have been carried out for our customers in the last 12 months. These newer products will require imminent placement of production capacity,” he added. 

Shares of KESM fell one sen or 0.11% to close at RM9.43, giving it a market capitalisation of RM405.63 million. The counter saw some 10,400 shares traded. KESM shares have retreated 53.82% from RM20.42 a year ago.