LB Aluminium 1Q net profit down 26% on reduced margins

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KUALA LUMPUR (Sept 28): LB Aluminium Bhd's net profit fell 25.8% to RM2.67 million in the first financial quarter ended July 31, 2018 (1QFY19) from RM3.6 million a year ago, due mainly to reduced margins resulting from depressed export returns owing to the strengthening of the ringgit and higher raw material input costs.

This resulted in lower earnings per share of 1.07 sen for 1QFY19 compared with 1.45 sen for 1QFY18.

This was despite a 9.2% increase in quarterly revenue to RM135.65 million versus RM124.43 million in 1QFY18, due mainly to higher business volume and average selling prices.

"The revenue from export business increased by 30.8% to RM49.5 million, contributed by better performance in Canada, China and South Africa," said LB Aluminium.

On prospects, the group is optimistic that it will remain profitable for the forthcoming quarter.

"Moving forward, the global economy is expected to expand further in the second half of 2018 underpinned by growth in both advanced and emerging market economies. The downside risks to the global outlook include the escalating of trade conflicts among major economies, monetary policy normalisation in the advanced economies and geopolitical tensions in Middle East," it said.

The weakening of the ringgit against the greenback also augurs well for the group as its exports are priced in US dollar.

"The group's profit margins are expected to improve in the next quarter with the strengthening of the US dollar, coupled with the stabilising of the aluminium prices. As usual, we are continuously looking into our processes to improve efficiency and reduce operational costs to ensure our margins are reasonably protected," added LB Aluminium.

Shares of LB Aluminium closed one sen or 1.79% lower at 55 sen today, for a market capitalisation of RM136.67 million. Over the past year, the stock has fallen 30.7% from 79.4 sen.