Muda Holdings sinks into the red in 2Q due to machinery upgrade costs

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KUALA LUMPUR: Muda Holdings Bhd sank to a net loss of RM8.25 million for the second quarter ended June 30, 2022 (2QFY22), from a net profit of RM23.35 million a year earlier, dragged by the costs of a planned major machinery upgrade.

This resulted in a loss per share of 2.71 sen versus earnings per share of 7.98 sen, according to the integrated paper mill and corrugated box manufacturer’s bourse filing on Wednesday (Aug 24).

Quarterly revenue was up 9.22% to RM436.61 million from RM399.77 million, due to better selling prices across the group’s range of products ― namely recycle waste paper, industry grade paper and paper packaging products.

However, the group’s earnings were weighed down by the planned upgrade of major machinery in Kajang ― which was divided into two phases, namely “upgrade to machine” (Phase 1) and “testing and commissioning” (Phase 2).

“Phase 1 of the upgrade was completed on June 2022 and currently proceeding with Phase 2. The abnormal costs from Phase 1 was RM14.1 million, which includes the write-off of machinery.

“Stripping out the planned upgrade cost, the group should record a profit before tax of RM7.1 million,” it added.

For the six-month period, Muda Holdings posted a net profit of RM4.02 million, down 93.27% from RM59.77 million, while cumulative revenue increased 10.72% to RM902.1 million from RM814.78 million.

Going forward, Muda Holdings said it expects headwinds to remain, as it foresees its margins pressured by the ongoing disruptions in the supply chain, raw material shortages and geopolitical uncertainties.

In addition to this, the group noted that rising inflationary pressure resulting from higher electricity and natural gas tariffs, coupled with the new minimum wage policy in Malaysia, as well as Bank Negara Malaysia’s overnight policy rate hike will result in higher costs to its manufacturing operations.

“Against this challenging backdrop, the group remains focused on driving sustainable growth in the remainder of the year. Despite increased pressure on our bottom line, the group will continue to emphasise on cost management, efficiency improvement and automation initiatives across our operations.

“Barring any unforeseen circumstances, the group is positive that its performance will remain profitable for the financial year ending Dec 31, 2022 (FY22),” it added.

Shares in Muda Holdings closed six sen or 3.14% higher at RM1.97 on Wednesday, giving the group a market capitalisation of RM600.95 million.

Source : The Edge Markets

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