Production halts due to pandemic lockdown drag VS Industry into the red in 3Q

Production halts due to pandemic lockdown drag VS Industry into the red in 3Q
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KUALA LUMPUR (June 23): Hit by temporary production halts due to the pandemic lockdown, VS Industry Bhd posted a net loss of RM21.19 million for its third quarter ended April 30, 2020 (3QFY20) compared with a net profit of RM26.03 million a year ago.

The electronic manufacturing services provider warned of lower earnings in the current financial year amid cautious consumer spending. 

The last time VS Industry reported a net loss was in the quarter ended Sept 30, 2011 — some nine years ago.

Its quarterly revenue came in at RM505.65 million, down 43% from RM888.26 million in the previous corresponding quarter.

For the nine-month period ended April 30, 2020 (9MFY20), the group’s net profit fell 37.4% to RM56.47 million from RM90.20 million previously, while its cumulative revenue dropped 19.7% to RM2.36 billion from RM2.94 billion.

In a bourse filing, VS Industry said all its geographical segments including Malaysia, China and Indonesia have been loss-making in 3QFY20.

The group said temporary production halts that resulted in lower orders fulfilled are the main reasons for the lacklustre results in its Malaysia and China segments.

As for its Indonesia segment, despite achieving higher revenue, less favourable sales mix and inventories write-off had weighed on its earnings performance. 

Commenting on prospects, the group said it expects to return to profitability in the coming quarter with the resumption of operations.

However, it cautioned that overall order flow from customers during this financial year is expected to be lower than the previous year, as the Covid-19 induced economic disruptions have induced more cautious behaviour in consumer spending.

“At present, visibility of order flow is also shorter as compared to previously,” it said.

It highlighted that discussions with prospective customers continued to be hindered by the restriction on international travels, and meaningful progress may only be achieved as and when the restriction is lifted.

On a brighter note, VS Industry said with countries now progressively opening up their economies, the situation should be improving gradually.

On balance, it commented that the group’s overall results for the current year is expected to be lower than the previous year, although its longer-term prospects remain intact.

“Under the stewardship of the experienced board and management team, which is further backed by a strong balance sheet, the group is confident to navigate through the prevailing challenges,” it said.

VS Industry's share price rose three sen or 3.1% to close at RM1 today, giving it a market capitalisation of RM1.86 billion. Since its March 18 low of 63.5 sen, the stock has rebounded by some 57%. However, year-to-date it is still down by 24.8%.