KUALA LUMPUR (Dec 16): Electronics manufacturing service group VS Industry Bhd reported a net profit of RM39.39 million for the first quarter ended Oct 31, 2021 (1QFY22), a decline of 40.9% from RM66.68 million a year prior, according to a bourse filing on Thursday (Dec 16).

Earnings per share for the quarter also declined to 1.03 sen from 1.78 sen last year.

In terms of revenue, VS Industry saw a quarterly figure of RM967.99 million, slipping 2% or RM19.1 million from RM987.1 million a year earlier.

Nonetheless, the group declared a first interim dividend of 0.4 sen per share to be paid on March 4, 2022, with an ex-date of Feb 17, lower than the 1.2 sen dividend per share declared last year.

VS Industry said its revenue declined largely due to lower contributions from its Malaysian operations, while profit before tax was affected by lower orders for its printed circuit board assembly from key customers and component supply chain disruptions, which were partially offset by box-built production for a new customer.

It added that its Malaysian operations saw a decline in performance as costs were higher due to an increase in labour and raw materials, higher depreciation from new facilities as well as Covid-19 pandemic-related costs mandated by the government. 

It also noted that its Malaysian operations started mass production for a new key client during the quarter but had yet to achieve the optimal level amid supply chain disruptions that lowered operational efficiency.

On its overseas operations, VS Industry said its Indonesia segment continued to record a healthy performance, with a profit before tax of RM2.1 million, in line with an increase in sales orders from a key customer, while the China segment recorded a lower revenue of RM31.94 million and a loss before tax of RM3.17 million due to underutilisation and absence of large orders, but losses were narrowing with streamlining initiatives in place.

Compared to the preceding quarter ended July 31, 2021 (4QFY21), the group’s revenue was marginally higher by 2.86% from RM941.12 million, while net profit narrowed by 5.08% from RM41.5 million, mainly attributed to an increase in costs in 1QFY22.

VS Industry’s board said it is cautiously optimistic about the outlook for the group and expects the financial performance for the remaining quarters of FY22 to be satisfactory on a balance of factors.

“Disruptions to [the] global supply chain have resulted in component shortages, tight supply in global logistics and longer lead time, affecting many industries, including electronics manufacturing services. In addition, the group faces some pressures given the rising cost environment,” the group wrote on the negative impact of the Covid-19 pandemic on its operations.

“Overall demand by customers remained robust and is largely expected to be sustained in the coming quarters. The group is also currently in discussions with key customers on potential new orders which, if materialised, will contribute to future earnings. At the same time, the business development team continued to receive enquiries from prospective MNC (multinational corporation) customers and is following up on some shortlisted names,” Datuk SY Gan, the managing director of VS Industry, said in a separate statement.

On labour shortages, VS Industry said it had stepped up hiring of local workers following the ban on foreign workers (from entering the country) since last year, adding that the overall situation, while challenging, is manageable at the moment.

Meanwhile, according to the filing, VS Industry’s new 413,682 sq ft facility in I-Park @ Senai Airport City recently commenced operations with production floor spaces fully allocated to existing customers and production utilisation expected to pick up gradually in the coming quarters.

The filing also wrote that VS Industry's future capacity expansion is already in place as it had acquired three parcels of land adjacent to its existing facilities in Senai, Johor measuring 386,381 sq ft for RM30 million. 

“Over in Indonesia, the performance is expected to be sustained based on current order visibility. As for operations in China, both cost management initiatives as well as discussions with prospective customers are still ongoing,” the group wrote on its overseas operations.

At the time of writing on Thursday, shares in VS Industry were four sen or 3.15% higher at RM1.31, giving the group a market capitalisation of RM5 billion.