Unaudited Financial Statements And Dividend Announcement For The Third Quarter Ended 30 September 2018
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For the 3 months ended 30 September 2018 (“3Q2018”) and 9 months ended 30 September 2018 (“9M2018”)
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Review of Group’s performance for the 3 months ended 30 September 2018 (“3Q2018”) as compared to the 3 months ended 30 September 2017 (“3Q2017”)Revenue
The Group’s revenue decreased by approximately RM33.9 million, or 39.6%. This was mainly attributable to:
- the decrease in the number of laden container (“40-ft containers”) sold from 1,560 40-ft containers in 3Q2017 to 1,102 40-ft containers in 3Q2018 as a result of lower demand from customers mainly from the United States of America (“US”) due to a drop in demand from the Group’s customers; and
- the decrease in the average selling price per container from RM55,000 in 3Q2017 to RM47,000 in 3Q2018 was the result of the strengthening of the RM against US$. The average movement of RM against USD has strengthened by approximately 4.1% in 3Q2018 as compared to 3Q2017.
Cost of sales and gross profits
The cost of sales decreased by approximately RM24.3 million, or 37.1% mainly due to the decrease in raw materials purchased, labour costs and subcontractors’ costs. The decrease in these costs was mainly due to the lower level of production during 3Q2018.
The gross profit decreased by approximately RM9.6 million, or 47.9%, and overall gross profit margin decreased from 23.4% in 3Q2017 to 20.2% in 3Q2018 as a result of the decrease in the average selling price arising from the strengthening of the RM against US$. As explained above, the average RM against the US$ has strengthened by approximately 4.1% in 3Q2018 as compared to 3Q2017.
Interest income decreased by approximately RM0.08 million, or 33.9% mainly due to lower interest rate for cash being placed under short term deposits in the bank account maintain in Singapore.
Other income increased by approximately RM2.2 million, or 332.4% mainly due to net foreign exchange gain recorded in the books of the Group in 3Q2018 as compared to 3Q2017 as the Group was holding lesser USD-denominated assets in 3Q2018 as compared to 3Q2017.
Selling and administrative expenses
Selling and administrative expenses decreased by approximately RM0.7 million, or 13.4% mainly due to the decrease in freight and handling charges, staff costs, directors’ remuneration and wastage disposal cost.
Profit for the period
As a result of the foregoing, the Group’s net profit for 3Q2018 decreased by approximately RM6.7 million, or 49.7% as compared to 3Q2017.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Review of the Group’s financial position as at 30 September 2018 as compared to 31 December 2017
Property, plant and equipment increased by approximately RM4.4 million, or 3.8% mainly due to the purchase of machinery and equipment as well as a motor vehicle during the 9 months period ended 30 September 2018 (“9M2018”).
Leasehold land decreased by approximately RM0.2 million, or 1.9% due to the amortisation of the leasehold land.
Inventories increased by approximately RM2.2 million, or 5.8% mainly due to the increase in the Group’s inventories towards the end of 9M2018 to meet the orders in the following quarter.
Trade and other receivables of approximately RM27.4 million comprised trade receivables, receivables from related parties, deposits and other receivables. The decrease in trade and other receivables by approximately RM7.2 million, or 20.8% was mainly due to the decrease of sales towards the end of 9M2018.
Prepaid operating expense of approximately RM0.5 million comprised mainly of expenses paid in advance as at 30 September 2018. The decrease in the prepaid operating expense was due to IPO expenses either being expensed off to the income statement or capitalised to equity in 9M2018.
Current liabilities and non-current liabilities
Loans and borrowings comprised of obligations under finance leases, short-term trade financing and bankers’ acceptance. The decrease in loans and borrowings by approximately RM4.2 million, or 45.2% was mainly due to the decrease in the usage of short term trade financing towards the end of 9M2018.
Trade and other payables of approximately RM20.0 million comprised trade payables, amount due to related parties, contract liabilities and sundry payables. The decrease in trade and other payables of RM10.6 million, or 34.6% was mainly due to the settlement of debt towards the end of 9M2018.
Other liabilities of approximately RM3.4 million comprised of accrued operating expenses, advances from customers and accrual for purchase of equipment. The decrease in other liabilities of RM1.5 million, or 30.3% was mainly due to lesser accrued expenses as at 30 September 2018 as a result of lesser allowances and performance incentives being provided.
Tax payable of approximately RM0.4 million comprised of estimated tax liabilities that the Group is liable to pay for the financial year ending 31 December 2018. The decrease in tax payable of RM2.9 million, or 87.9% was mainly due to the decrease in the expected tax payable for the financial year ending 31 December 2018.
REVIEW OF THE GROUP'S CASH FLOW STATEMENT
Review of the Group’s cash flow statement for 3Q2018 as compared to 3Q2017
The Group recorded net cash flows from operating activities of approximately RM1.8 million in 3Q2018 which was lower as compared to approximately RM9.5 million in 3Q2017 mainly due to the decrease in the sales of the Group during the 3Q2018.
The Group recorded net cash flows used in investing activities of approximately RM2.8 million in 3Q2018 mainly due to the purchase of new machineries with improved capabilities.
The Group recorded net cash flows used in financing activities of approximately RM2.2 million in 3Q2018 mainly due to the repayment of obligations under finance lease and short term borrowings during the period.
- The United States Dollar (“USD”) has strengthened against Malaysian Ringgit (“RM”) since July 2018. In view of that, the Group will continue to monitor the exchange rates before making any changes to its products’ selling prices which are denominated in USD.
- The Malaysian government had in the recent budget announcement on 2 November 2018 announced that the minimum wage will be raised from RM1,000 to RM1,100
effective from 1 January 2019 which will have an impact on manufacturers who are labour intensive. In view of that, the Group will continue to explore new technology and the use of machineries to be more efficient in its manufacturing processes so as to reduce its reliance on labour.
- Our exports to US have reduced recently as many US customers have exercised more caution in their purchases due to the uncertainties in the trade war between China and US. This reduction in exports has not only affected us but also most of our competitors who have also seen reduction in the demand of their products from US.