This article first appeared in The Edge Financial Daily on August 30, 2018

KUALA LUMPUR: UMW Holdings Bhd, which reported its second consecutive quarterly profit in the second quarter ended June 30, 2018 (2QFY18), is bracing itself for the reintroduction of the sales and services tax (SST) on Saturday as it could dampen consumer demand in vehicle sales, which would have an impact on the automotive segment.

It also warned that for the group’s equipment segment, the heavy equipment business may be impacted by the ongoing review of mega infrastructure projects in the country.

“Nevertheless, given the current level of orders secured, the business is expected to perform satisfactorily. Furthermore, the industrial equipment rental business is expected to perform well in the second half of the year, driven by demand from the warehouse and logistics sector,” it said in a statement yesterday.

In the manufacturing and engineering (M&E) segment, sustained demand for auto components and lubricants is forecast to contribute to better results, added UMW.

It noted that the aerospace business is currently producing and delivering the fan cases to Rolls-Royce as per the contractual requirement.

“Overall, the group is expected to perform satisfactorily for the financial year ending Dec 31, 2018 (FY18),” said UMW.

The group posted a net profit of RM124.38 million for 2QFY18 compared to a net loss of RM209.3 million for 2QFY17. As a result, it recorded an earnings per share of 10.65 sen for 2QFY18 compared to a loss per share of 17.92 sen for 2QFY17.

Quarterly revenue grew 5.9% to RM2.92 billion from RM2.76 billion a year ago, contributed by the group’s three core business segments with increase in sales arising from the goods and services tax–free period.

UMW president and group chief executive offier Badrul Feisal Abdul Rahim attributed the better quarterly performance to the group’s strategic decision in 2017 to exit the oil and gas industry, and refocus on strengthening its three core businesses of auto, equipment and M&E.

“The group is now firmly on the recovery path and we are in an even better position to execute our long-term growth strategy and enhance shareholder value,” he said.

The improved quarterly performance helped turn around the group in the cumulative six months ended June 30, 2018 (1HFY18), posting a net profit of RM198.46 million compared to a net loss of RM189.14 million a year ago, although revenue fell 2.2% to RM5.33 billion from RM5.45 billion in 1HFY17 on lower total industry volume faced by the auto segment.

UMW shares closed up 2.54% or 15 sen at RM6.05 yesterday, bringing a market capitalisation of RM7.07 billion.