Avarga Limited has posted earnings of $39.9 million for the 2HFY2020 ended December, registering a 346% increase from earnings of $8.9 million a year ago.
This brings FY2020 earnings to $54.8 million, 68% higher than FY2019 earnings of $32.6 million.
2HFY2020 earnings per share (EPS) came in at 4.22 cents on a fully diluted basis, compared to 0.94 cents a year ago.
FY2020 EPS stood at 5.79 cents, from FY2019’s 3.44 cents.
Revenue for the 2HFY2020 increased 36% y-o-y to $973 million, while FY2020 revenue grew 21% y-o-y to $1.69 billion, making it the highest so far for the company.
The higher revenue was led by a surge in contribution from Avarga’s 69.7%-owned building materials business, Toronto-listed Taiga Building Products.
Revenue from Taiga for the 2HFY2020 increased to $939.5 million from $682 million in the 2HFY2019.
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FY2020 revenue for Taiga stood at $1.6 billion, compared to the $1.3 billion posted in FY2019.
Taiga’s margins were boosted by significantly higher commodity prices, particularly for lumber.
In addition, Taiga gained from the strong housing markets in the Canada and the US, which was caused by record low interest rates, and the trend towards suburban homes due to the remote working arrangements brought about by the Covid-19 pandemic.
In a separate filing on Feb 26, Taiga announced a special dividend payment of 27.64 Canadian cents (29.03 cents) per share to be paid on March 19.
2HFY2020 gross profit more than doubled to $165.1 million from $77.9 million a year ago, while FY2020 gross profit increased 65% y-o-y to $247.7 million.
Overall gross profit margin (GPM) for the 2HFY2020 increased 6.1 percentage points to 17%, while FY2020 GPM rose 3.9 percentage points to 14.6%.
Net profit for the 2HFY2020 surged 307% y-o-y to $54.4 million, while FY2020 net profit increased 84% y-o-y to $74.8 million.
As at Dec 31, 2020, cash and cash equivalents stood at $19.0 million.
For the FY2020, the group has proposed a final dividend of 0.78 cents per share, up from 0.50 cents per share for the FY2019.
With the interim dividend of 0.72 cents, the total dividend payout for FY2020 stands at 1.5 cents per share for the FY2020.
Payment of the final dividend will be made on May 21.
In its outlook statement, the group says there may be economic and financial challenges for the foreseeable future for Taiga due to the ongoing Covid-19 pandemic.
The building products business’ financial performance is largely dependent on the residential construction, renovation and repairs markets in North America, which are affected by the movements of the general economy.
“Taiga's sales are typically subject to seasonal variances that fluctuate in accordance with the home building season in Canada and the United States. Taiga generally experiences higher sales in the second and third quarters and reduced sales in the late fall and winter during its first and fourth quarters of each year, when home building activity is low due to the cold weather,” it says.
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During the year, Avarga’s paper manufacturing division business in Malaysia was affected by the Movement Control Order (MCO), which resulted in lower production and higher costs.
The group says it is “mindful” of the risks of developments related to Covid-19. China’s environmental policies on solid waste are also expected to influence the price of waste paper and paper products in the region. That said, the growing shift in e-commerce is positive for demand, says the group.
Operations at Avarga’s power plant business in Myanmar have continued as normal and have not been affected by the coup that took place in the country on Feb 1.
During the pandemic, production of electricity was not affected, given the need for supply in the country.
The group says earnings for the power plant are largely backed by a 30-year power purchase agreement, expiring in February 2044, with the Electric Power Generation Enterprise (EPGE), under Myanmar's Ministry of Electricity and Energy.
Avarga’s executive chairman is Tong Kooi Ong, who is also chairman of The Edge Media Group, the parent company of the publisher of The Edge Singapore. Ian Tong, CEO of Avarga, is also an executive director of The Edge Media Group.
Shares in Avarga closed 3 cents higher or 9.0% up at 36.5 cents on Feb 26.
