PETALING JAYA: Hap Seng Consolidated Bhd reported a drop of 91% in net profit to RM50.30 million in the third quarter ended Sept 30, 2023 (Q3 FY2023) from RM563.75 million a year ago.
Revenue was 22% weaker at RM1.54 billion from RM1.97 billion due to lower contribution from all divisions except credit financing and building materials divisions.
In a filing with Bursa Malaysia today, it said operating profit slipped 31% to RM172.6 million amid weaker profit contributions from property, credit financing, automotive and trading segments, but mitigated by higher profit contributions from plantation and building materials divisions.
Hap Seng said the building materials division saw revenue increase by 33% to RM256.6 million from the preceding year’s corresponding quarter of RM192.3 million with higher contributions from both its Singapore-listed Hafary Holdings Ltd as well as the quarry, asphalt, and bricks businesses.
Hafary’s revenue was 40% higher than the preceding year’s corresponding quarter, benefitted from the higher project and general sectors’ sales in tandem with the active construction and renovation sectors in Singapore, and the contribution from its Malaysian operations following the reorganisation of the tiles business from the building materials division.
Revenue from quarry, asphalt and bricks business was 12% higher boosted by higher sales volume and improved average selling prices of aggregate products in both its markets in Malaysia and Singapore.
The credit financing division’s revenue was slightly affected to end the quarter at RM57.1 million from RM57.3 million in the third quarter ended Sept 30, 2022 (Q3 FY2022), benefitted from the reversal of interest in suspense with the continuing normalisation of loans under the Syarikat Jaminan Pembiayaan Perniagaan (SJPP) Guarantee Scheme.
However, the loan base at the end of the current quarter was 12% lower, at RM2.53 billion, dragged down by lower disbursements and also the divestment of its Manchester operations in the UK via HS Credit (Manchester) Ltd.
The plantation division’s revenue for Q3 FY2023 declined 10% to RM164.6 million, dragged down by the lower average selling price but mitigated by higher sales volume of crude palm oil (CPO) at 36,726 tonnes, 18% above the same period last year.
Palm kernel sales volume was 25% higher at 8,167 tonnes, which benefitted from higher production.
The division also benefitted from a gain from fair value adjustments of biological assets of RM15 million compared to a loss of RM24.2 million.
Meanwhile, revenue for the property segment declined 12% to RM128.8 million following lower sales mainly in both East and Peninsular Malaysia projects.
Hap Seng said the automotive division’s revenue for the quarter dipped 33% to RM315.6 million, affected by lower sales from both its passenger car and commercial vehicle segments.
In comparison, revenue for the trading unit shrank 30% to RM726.9 million with lower revenue from both its fertilisers and general trading businesses.
The group said that based on the foregoing, it is cautiously optimistic about achieving satisfactory results for the financial year ending Dec 31, 2023.
It expects the quarry, asphalt and bricks business to continue to benefit from the ongoing major projects in East Malaysia and Brunei.
In Singapore, Hafary is expected to benefit from the residential properties resale market which is anticipated to remain relatively stable in the fourth quarter of this year and the launch of build-to-order flats by the Housing Development Board.
With production costs expected to remain high due to inflationary pressures and the high prices of fertiliser, diesel and other input materials as well as higher labour costs, the group said the plantation segment will continue to put concerted efforts to improve the overall efficiencies and practice good plantation husbandry to improve yield and extraction rates to mitigate unit production cost.
At market close, Hap Seng’s share price gained 20 sen or 4.17% to RM5.00, giving it a market capitalisation of RM12.45 billion.