This article first appeared in The Edge Financial Daily, on November 19, 2015.

KUALA LUMPUR: Auto parts maker MBM Resources Bhd saw its net profit fall 66.8% to RM8.62 million or 2.21 sen a share for the third quarter ended Sept 30, 2015 (3QFY15) from RM26.01 million or 6.66 sen a share a year ago, mainly due to lower contributions from its joint venture (JV) with Autoliv Hirotako Sdn Bhd and associates.

Revenue for 3QFY15 dropped 2.8% to RM411.18 million from RM423.09 million in 3QFY14, due to lower sales of continental makes of higher value despite better overall volume sales.

In a filing with Bursa Malaysia yesterday, MBM Resources said share of results of the JV fell by 39.1% year-on-year (y-o-y) to RM2.7 million in 3QFY15, while share of results of associate companies declined by 54.3% y-o-y to RM13.2 million.

“Share of the JV’s results declined 39.1% due to lower production deliveries to one of its major customers and unfavourable foreign-exchange movement,” it said.

“Associates’ results were lower by 54.3% to RM13.2 million, mainly due to adverse foreign-exchange movement, despite higher vehicle sales by Perusahaan Otomobil Kedua Sdn Bhd,” it added.

The group’s gross debt-to-equity ratio as at Sept 30 was 21.4%, compared with 25.7% a year ago, while net asset value per share rose to RM4.07.

The weak results pulled down its net profit for the nine-month period (9MFY15), which dropped 9.5% to RM72.99 million or 18.68 sen a share from RM80.67 million or 20.65 sen a share in 9MFY14.

Revenue for 9MFY15, however, rose by a marginal 1.1% to RM1.38 billion from RM1.36 billion in 9MFY14.

On prospects, MBM Resources said the current market condition is expected to remain challenging.

“Market competition remains intense as market players are expected to continue their aggressive sales campaigns to stay competitive and maintain [their] market share.

“The further weakening of the ringgit will affect margins and operating costs of the group, as well as [the] JV and associates,” it added.

MBM Resources said it is leveraging sales campaigns by brand principals to push for vehicle sales and improving aftersales revenue.

It is also preparing for higher production of alloy wheels to meet newly secured orders from customers, and will continue to focus on its cost and working capital management.

MBM Resources shares closed three sen or 1.07% higher at RM2.83 yesterday, with a market capitalisation of RM1.09 billion.

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