KUALA LUMPUR (May 20): Chemical Company of Malaysia Bhd (CCM) reported a two-thirds decline year-on-year in its net profit to RM2.18 million for the first quarter of the financial year 2020, on continued margin squeeze from lower average selling price of its chlor-alkali products.

A share of loss from its associate Orica-CCM Energy Sdn Bhd of RM1.1 million, together with lower volume sold from its chemicals business as customers got hit by the Movement Control Order (MCO), also affected earnings during the quarter ended March 31, 2020.

In addition, the previous corresponding quarter had enjoyed a one-off land disposal gain of RM1.1 million.

Hence, its latest quarterly profit fell 65% y-o-y from RM6.25 million though revenue dipped less than 1% to RM96.63 million from RM96.98 million, its stock exchange filing today showed. Earnings per share retreated in tandem to 1.3 sen from 3.72 sen.

CCM said its chemical division - its largest revenue contributor - posted a loss before tax of RM227,000 compared to a profit before tax (PBT) of RM7.78 million previously, while revenue declined 4.9% to RM70.72 million from RM74.35 million.

Besides margin squeeze, lower volume sold and its share of loss from the associate, the group also incurred depreciation on its newly reactivated plant in Pasir Gudang and made a provision for doubtful trade receivables, which totalled RM1.2 million.
 
The weaker chemicals segment was partly offset by its improved polymer division, which saw PBT climb to RM6.11 million from RM5.09 million as polymers, used for rubber glove production, saw greater demand. Revenue rose 14.9% to RM27.36 million from RM23.81 million.

Going ahead, CCM said the expected softer regional caustic soda prices amid the global slowdown will unfavourably impact the overall performance of its chemical business.

"Nevertheless, CCM’s chemicals products are used in the production of personal hygiene and disinfectants, key chemicals for the water treatment sector, and also used in the manufacturing of gloves.

"These industries are highly essential in helping to contain the spread of COVID-19. The demand for our key products is expected to increase with the easing of the MCO as most of our key customers will be in full operation. The increase in demand is anticipated to mitigate the impact of the softer caustic soda prices for the year," it said.

Its polymers business, meanwhile, is expected to continue to improve, with stable margin, as "demand from glove makers is projected to surge" due to the pandemic.

CCM shares finished 2.99% or four sen higher at RM1.38 apiece today, giving it a market capitalisation of RM230.04 million. It saw 636,100 shares done. The stock is down about 31% from a year ago.