KUALA LUMPUR (May 26): UMW Holdings Bhd saw its net profit dip 30% on-year to RM165.15 million or 14.4 sen in the first quarter ended March 31, 2015 (1QFY15) compared to RM235.55 million or 20.16 sen previously on lower revenue from its automotive, and manufacturing and engineering segments.

Revenue declined 9.6% to RM3.24 billion in 1QFY15 compared to RM3.58 billion in 1QFY14, its filing with Bursa Malaysia showed.

UMW Holdings (fundamental: 2.2; valuation: 1.4) said the automotive segment recorded lower revenue of RM2 billion in 1QFY15 compared to RM2.66 billion in 1QFY14 as Toyota core vehicle models faced stiff competition from the new model launched by other players in the market.

The weakening of the ringgit had also unfavourably affected the segment’s profit.

The manufacturing and engineering segment recorded a lower revenue and profit before taxation in 1QFY15 of RM171.1 million and RM1.8 million, respectively due to lower sales by the autocomponent manufacturers especially on the four wheelers products.

The segment’s lower performance was, however, mitigated by better contribution from the lubricant business, the note read.

Its oil and gas segment’s revenue increased 59.8% to RM312.5 million in 1QFY15 compared to RM116.9 million due to full contribution from its fleet of oil rigs known as UMW NAGA 5 and UMW NAGA 6 which commenced operations in May and October 2014, respectively; improved operating efficiency by UMW NAGA 2 and UMW NAGA 3; and additional revenue from hydraulic workover unit GAIT 3 and GAIT 6.

However, the segment’s profit before taxation of RM42.5 million recorded in1QFY15 was lower compared to RM58.3 million reported in 1QFY14, mainly attributed to discounts on time charter rates given to existing clients in view of the significant drop in oil price and the termination of contract of oil rig UMW NAGA 7 with Frontier Oil Corporation.

UMW Holdings foresees that the rest of financial year 2015 to be challenging, as the automotive segment faces stiff competition with new model launches and aggressive promotions from major competitors in the market, drop in oil prices and intense competition from other major players in the lubricant business while its automotive components manufacturing business will continue to be affected by the market condition.  

UMW Holdings’ shares closed 4 sen or 0.38% higher at RM10.70, with a market capitalisation of RM12.45 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)