Earnings of steel products distributor Asia Enterprises surged 471% to $1.3 million in 1HFY21 ended June, from $227,000 in the year, despite a substantial drop in its revenue.
On a fully diluted basis, this translates to earnings per share of 0.38 cents, compared to 0.07 cents in 1HFY20.
With this, its net asset value per ordinary share was $27.47 on June 30, compared to $27.59 on Dec 31.
Revenue for the first six months of the year was down 37% to $17.6 million due to the lower sales volume for steel products.
Sales to its marine and offshore segment was down 43% to $12.8 million, while that from the engineering/fabrication segment softened by 23% to $2.0 million. Meanwhile, sales from its construction segment eased to $0.5 million as works continued to be hampered by manpower constraints.
Sales in Singapore was up 19% to $13.1 million on the back of stable sales volumes and higher average selling prices (ASPs).
Conversely, revenue from Indonesia plunged by 77% to $3.7 million following a contraction in orders from shipyards there. Similarly, revenue from Malaysia eased to $0.7 million in 1HFY21.
Overall, cost of sales was down 49% to $12.4 million, in line with the reduction in revenue.
Gross profit was up 32% to $5.2 million, from $4.0 million in the previous year. Gross profit margin correspondingly widened to 29.8% in 1HFY21, compared to 14,1% in 1HFY20. The group attributes this to the higher ASPs as well as a recovery in international steel prices since 4Q2020.
During the six-month period, Asia Enterprises’ other income and gains – comprising interest income and grants - amounted to $0.6 million.
Meanwhile, its marketing and distribution costs edged down to $0.2 million, from $0.4 million previously, in tandem with the level of freight and handling services required to fulfill customers’ orders.
Administration expenses however, was up to $4.2 million from $3.8 million due to higher provisions for professional and staff-related expenses.
The group's non-cash interest expense on lease liabilities was $0.1 million in 1HFY21, largely unchanged from 1HFY20. Other losses of S$7,000 was incurred in 1HFY21 was due to losses on disposal of investment.
As at June 30, Asia Enterprises’ cash and cash equivalents stood at $49.0 million, compared to $51.2 million. This follows net outflows from increases in inventories, trade and other receivables as well as for investments and the payment of dividends and lease liabilities.
No dividend has been recommended for 1HFY21, but the group says it will consider doing so with its full-year results.
Managing Director Yvonne Lee is heartened that the group’s improved profit came despite the difficult operative backdrop.
“While the upward trend of international steel prices has helped to drive profitability in 1HFY21, we are mindful of the impact of rising costs of steel materials and fluctuating market conditions on end-user demand in the industries that the group serves,” she adds.
Given its “sound and debt-free balance sheet” the group believes it is well-positioned to overcome business cycles.
Shares in Asia Enterprises closed up 0.1 cents or 0.65% at 15 cents on Aug 5, before its results announcement.
Cover image: file photo
